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<p>The purpose of penalties is to encourage taxpayers to comply with their tax obligations,
to act as a sanction for those who do not, and to reassure those who do that they
will not be disadvantaged by those who do not. Penalties are not used as a revenue-raising
mechanism.</p><p> </p><p>Parliament determines the laws relating to tax and to whom
they apply. HMRC apply those laws fairly and do not discriminate between different
taxpayers or size of business.</p><p> </p><p>HMRC can apply a large number of different
penalties, but they break down into three broad areas:</p><p> </p><ul><li><p>Automatic
penalties for failure to meet a time-bound obligation, such as submitting returns
or making payments by a specified deadline;</p></li><li><p>Penalties for failure to
meet a regulatory obligation, such as the requirement to keep certain records; and</p></li><li><p>Behaviour-based
penalties for inaccurate returns and documents and failure to notify taxable status.</p><p>
</p><p>A penalty is not payable if a person had a reasonable excuse for failing to
meet an obligation or took reasonable care to avoid submitting an inaccurate return.</p><p>
</p><p>HMRC do not record data on penalties issued by size of business.</p></li></ul>
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