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<p>Complexity in CAP rules and the interpretation that EU auditors place on regulations
is the root cause of many disallowance corrections. Since 2010, steps taken by Defra
have allowed the disallowance penalties incurred in England to be steadily managed
at around £50m per year. Throughout this period the Government has challenged claims
for disallowance through mediation in the EU and since 2010 reduced the amount of
disallowance levied by €285m.</p><p> </p><p> </p><p> </p><p>The Department’s Annual
Report and Accounts provides provisions of £64.5m for future disallowance related
to historical audits. While future disallowance penalties are difficult to predict,
the Government is concerned that the new Horizontal Regulation amends the way that
penalty rates are calculated, introducing a ratchet effect, which could greatly increase
proposed disallowance penalty corrections, even if the same standards of implementation
are maintained. The UK Government believes that a proportionate penalty scheme in
the Horizontal Regulation is a priority for CAP simplification and the mid-term review
of CAP regulations.</p><p> </p>
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