RSTP3023 - Reduction of a penalty for special circumstances

RSTPA guidance on what Revenue Scotland might and might not consider to be special circumstances in relation to reducing the amount of certain penalties.

We may reduce the amount of any of the following penalties (including any interest in relation to the penalty) if we think it is right to do so because of special circumstances:

  • any penalty for failing to make a tax return (see RSTP3005);
  • any penalty for failing to make a payment to us (see RSTP3008);
  • a penalty for an inaccuracy in a taxpayer document given to us (see RSTP3011);
  • a penalty for an inaccuracy in a taxpayer document given to us and which is attributable to a person other than the taxpayer (see RSTP3012);
  • a penalty for failing to notify us about an under-determination or under-assessment of tax (see RSTP3013);
  • a penalty for failing to comply with a relevant requirement imposed by or under section 22 or 23 of the LT(S)A 2014 (see RSTP3019).

We may also decide, because of special circumstances, to apply any of the following actions in relation to these penalties (including any interest in relation to the penalty):

  • remitting the penalty entirely;
  • suspend it; and
  • agreeing a compromise with you in relation to proceedings for the penalty.

‘Special circumstances’ does not include your ability to pay, or the fact that a potential loss of revenue to us from you is balanced by a potential over-payment to us by someone else.

To be special circumstances, the circumstances in question must apply to you and must not be general circumstances that apply to many taxpayers by virtue of the penalty legislation.

Special circumstances are either uncommon or exceptional, or where the strict application of the legislation applying to the penalty in question produces a result that is contrary to the clear compliance intention of that legislation (see below).

Uncommon or exceptional circumstances

Special circumstances are something that is not otherwise provided for in legislation. So, for example, they will not include:

  • matters that amount to a reasonable excuse (see RSTP3022) or reasonable care (see RSTP3025); or
  • the usual factors - telling, helping and giving access - which we take into account when considering whether or not to reduce the amount of a penalty for quality of disclosure (see RSTP3024).

Special circumstances are uncommon or exceptional circumstances that should be clearly recognisable as such and are completely separate from the other considerations mentioned above.

Application of penalty legislation which produces a result that is contrary to the clear compliance intention of that legislation

We may reduce penalties for special circumstances where imposing the penalties would be contrary to the clear compliance intention of the legislation applying to the penalty in question.

However, we will not reduce penalties through special reduction where such a reduction would be contrary to the clear compliance intention of the penalty regime. In particular, we will not do so on the basis that the underlying tax liability has been paid.

Example:

The following example illustrates when special circumstances might exist. However, the precise facts of individual cases will be critical in deciding whether similar circumstances are special circumstances:

John and Mark, a father and son, traded in partnership as a landfill operator. John retired from the partnership trade. Mark continued to trade afterwards without registering with us as a sole trader. Mark continued to submit SLfT returns to us, but failed to notify us about the change of registration details. He was therefore liable to a penalty for failing to comply with a relevant requirement by or under section 22 or 23 of the LT(S)A 2014 (see RSTP3019).

In these precise circumstances, where there is a close association between the two tax entities (the tax arrangements before and after John retiring from the partnership), we may reduce the penalty to an appropriate level through special reduction.

If the change in tax entity resulted from normal commercial arrangements then such transfer of business circumstances would not be uncommon or exceptional and so would not be special circumstances.

RSTPA 2014 section 177

RSTPA 2014 section 191

RSTPA 2014 section 213

Ref ID: 
RSTP3023
Archive Date: 
15 March 2015
Last updated: 
15 March 2015
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