How to appeal an HMRC inaccuracy penalty

Q: What are the steps and time limits?

Appeal to HMRC in writing. GOV.UK says you usually have 30 days from the date the penalty was issued, and to follow the instructions on the penalty letter or use the appeal form that came with it. Paragraph 16 treats the appeal like an appeal against an assessment to the tax, and for direct tax section 31A(5) of the Taxes Management Act 1970 requires the notice to specify the grounds. Our guide to writing grounds of appeal covers structure. Discussion and offer of review. If HMRC does not change its decision, you will be offered a review by another HMRC officer. Under section 49C you have 30 days from the offer to accept it or notify the tribunal. If you do neither, HMRC's view is treated as settled by agreement. The review. HMRC must give its conclusions within 45 days, or another agreed period (section 49E(6)). You can also ask for a review at any time after appealing. Tribunal. After a review you have 30 days from the conclusion letter to notify the First tier Tribunal (section 49G). You can go straight to the tribunal instead of having a review, but not while a review you asked for is under way. For VAT inaccuracy penalties the process follows the indirect tax route: the decision letter offers a review and you have 30 days to accept it or appeal to the tribunal. HMRC's guidance also notes that you can ask for alternative dispute resolution instead, keeping your right of appeal if it fails. Missing a deadline is not always fatal: see late appeals.

You can appeal against four separate decisions on an inaccuracy penalty under Schedule 24 to the Finance Act 2007: that a penalty is payable, its amount, a refusal to suspend it, and the suspension conditions. The appeal normally has to reach HMRC within 30 days of the penalty notice, stating your grounds, and you do not have to pay the penalty while it is disputed. HMRC must prove the penalty is due, but some grounds, such as special reduction and suspension, succeed at tribunal only if HMRC’s decision was flawed.

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Which decisions can you appeal?

Paragraph 15 of Schedule 24 gives a right of appeal against a decision that a penalty is payable, a decision on its amount, a decision not to suspend it, and a decision setting conditions of suspension. HMRC’s Compliance Handbook at CH414100 stresses that each is a separate decision even where they concern the same penalty, so a notice of appeal should say which you are challenging. The appealable documents are the notice of penalty assessment, any amended assessment and the notice of suspension. The earlier penalty explanation letter is not appealable, though anything you said in reply to it will be part of the record.

What are the main grounds of appeal?

There was no inaccuracy, or the tax is wrong

The penalty is a percentage of the potential lost revenue, so if the underlying tax assessment is reduced on appeal, the penalty falls with it. HMRC’s guidance at CH414250 says the tribunal prefers to hear appeals against the tax and the penalty together.

You took reasonable care

A penalty under paragraph 1 requires the inaccuracy to be careless or deliberate. Paragraph 3 defines careless as a failure to take reasonable care. HMRC’s factsheet CC/FS7a says it will not charge a penalty if you took reasonable care but the return was still wrong, citing accurate records and checking with an adviser or HMRC when unsure. Where an agent made the error, paragraph 18(3) removes liability if you satisfy HMRC that you took reasonable care to avoid it. Special rules presume carelessness where an error relates to avoidance arrangements and exclude reliance on disqualified advice.

The behaviour was wrongly categorised

The difference between careless (30% maximum for a domestic case), deliberate (70%) and deliberate and concealed (100%) is the largest single driver of the amount. HMRC’s appeals guidance at ARTG8395 states that for penalties the burden is on HMRC to prove a penalty is due. A deliberate finding needs evidence of what the person knew and intended; our guide to the burden of proof explains how this works at tribunal.

The disclosure reductions are too low

Challenge a finding that the disclosure was prompted if you came forward before you had reason to believe HMRC had found or was about to find the error, and challenge any cut to the reduction for telling, helping and giving that ignores what you actually provided. These are appeals against the amount, and paragraph 17(2) lets the tribunal substitute any decision HMRC had power to make. See how HMRC reduces penalties for disclosure.

Special reduction should have been given

Under paragraph 17(3), if the tribunal substitutes its own decision it may apply special reduction to the same extent as HMRC, which may mean the same percentage on a different starting point, or to a different extent only if HMRC’s decision on special reduction was flawed. Flawed means flawed on judicial review principles (paragraph 17(6)). CH84080 lists the questions: whether HMRC acted lawfully, took account of relevant and ignored irrelevant considerations, listened to representations and acted reasonably.

The penalty should have been suspended, or the conditions are wrong

Only a careless penalty can be suspended, for up to two years, and only if a condition would help you avoid further careless penalties (paragraph 14). The tribunal may order suspension, or vary the conditions, only if HMRC’s decision was flawed (paragraph 17(4) and (5)). See suspended penalties for how conditions work.

The assessment was out of time

Paragraph 13(3) requires the penalty to be assessed within 12 months of the end of the appeal period for the decision correcting the inaccuracy or, if there was no assessment, of the date the inaccuracy was corrected.

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What are the steps and time limits?

Appeal to HMRC in writing. GOV.UK says you usually have 30 days from the date the penalty was issued, and to follow the instructions on the penalty letter or use the appeal form that came with it. Paragraph 16 treats the appeal like an appeal against an assessment to the tax, and for direct tax section 31A(5) of the Taxes Management Act 1970 requires the notice to specify the grounds. Our guide to writing grounds of appeal covers structure.
Discussion and offer of review. If HMRC does not change its decision, you will be offered a review by another HMRC officer. Under section 49C you have 30 days from the offer to accept it or notify the tribunal. If you do neither, HMRC’s view is treated as settled by agreement.
The review. HMRC must give its conclusions within 45 days, or another agreed period (section 49E(6)). You can also ask for a review at any time after appealing.
Tribunal. After a review you have 30 days from the conclusion letter to notify the First tier Tribunal (section 49G). You can go straight to the tribunal instead of having a review, but not while a review you asked for is under way.

For VAT inaccuracy penalties the process follows the indirect tax route: the decision letter offers a review and you have 30 days to accept it or appeal to the tribunal. HMRC’s guidance also notes that you can ask for alternative dispute resolution instead, keeping your right of appeal if it fails. Missing a deadline is not always fatal: see late appeals.

Do you have to pay the penalty while you appeal?

No. Paragraph 16(2) says the rule treating penalty appeals like tax appeals does not require the penalty to be paid before the appeal is determined. CH84070 confirms that a person appealing a Schedule 24 penalty is not required to pay the underlying tax or the penalty before the appeal is heard, and CH414300 tells officers to stop debt collection on disputed penalties. The tax itself is treated differently; see postponing tax pending an appeal.

How can a review change the outcome?

A review can reach a different behaviour finding. CH414160 gives the example of a deliberate penalty that the review officer decides was careless: the file goes back to the decision maker to reduce the penalty and then consider suspension, which is itself a fresh appealable decision. The same happens if a review accepts your argument that a careless penalty should have been suspended.

Illustration only. HMRC charges Daniel a deliberate, prompted penalty on £8,000 of tax. The range is 35% to 70%, and with a 50% reduction for quality of disclosure the penalty is 52.5%, or £4,200. He appeals within 30 days on two grounds: the error came from a misunderstanding his accountant shared, so it was at worst careless, and he disclosed it unprompted. A review accepts carelessness but not the unprompted point. The careless prompted range is 15% to 30%; with the same 50% quality of disclosure the penalty becomes 22.5%, or £1,800, and HMRC must then consider suspending it.

What mistakes do people make?

Writing a complaint instead of an appeal when the dispute is about the penalty decision itself.
Appealing only the amount when the real dispute is behaviour, or forgetting to appeal the refusal to suspend as a separate decision.
Ignoring an offer of review, which can leave HMRC’s decision treated as agreed.
Arguing hardship as special circumstances. Paragraph 11 excludes ability to pay.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.