HMRC can suspend a penalty for a careless error in a tax return for up to two years. If you meet the conditions it sets during that time, the penalty is cancelled and you never pay it. Suspension is only available for careless inaccuracies, not deliberate ones, and if you are charged another inaccuracy penalty during the suspension, the suspended penalty becomes payable.

What does the law say?

Paragraph 14 of Schedule 24 to the Finance Act 2007 says “HMRC may suspend all or part of a penalty for a careless inaccuracy”. The suspension period cannot exceed two years. HMRC’s notice must set conditions, meaning the action you need to take and the period for taking it, and HMRC may only suspend a penalty if meeting those conditions would help you avoid further penalties for careless inaccuracies.

What kind of conditions does HMRC set?

HMRC’s factsheet CC/FS10 says conditions must be SMART: specific, measurable, achievable, realistic and time bound. They usually target the cause of the error, for example:

  • putting a proper bookkeeping system in place;
  • reconciling sales records to bank statements each month;
  • having VAT returns reviewed before they are filed;
  • keeping a mileage log.

The factsheet also says you must send all returns on time during the suspension period, and that suspension is normally for less than the full two years.

When will HMRC not suspend a penalty?

  • for deliberate inaccuracies: CC/FS10 says “We cannot suspend penalties for deliberate or deliberate and concealed inaccuracies”;
  • where no condition would realistically help you avoid future careless errors, for example a one off mistake that cannot happen again;
  • according to the factsheet, it is unlikely where the penalty relates to a tax avoidance scheme.

What happens at the end of the suspension?

If you have met the conditions, the suspended penalty is cancelled. If you have not, it becomes payable. It also becomes payable if you become liable to another inaccuracy penalty during the suspension. CC/FS10 says HMRC’s decision at the end of the period cannot be appealed, only challenged by judicial review.

Can I ask HMRC to suspend a penalty?

Yes. If HMRC proposes a penalty for a careless error and does not offer suspension, your accountant can ask for it and suggest suitable conditions. You can also appeal HMRC’s decision not to suspend. Getting the behaviour classed as careless rather than deliberate, and securing the right reduction for disclosure, are usually the most valuable parts of the negotiation. See HMRC penalties for tax return errors.

Does insurance pay the penalty?

No. Tax investigation insurance never pays tax, interest or penalties. It pays your accountant’s fees for the enquiry and the penalty negotiation, up to the policy limit. Solar Protect cover pays up to £100,000 with no excess. Read how our cover works or get a quote today.

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 7 October 2026. Sources: Finance Act 2007 Schedule 24 paragraph 14; HMRC factsheet CC/FS10. This guide is general information, not personalised tax advice.