Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Penalty definition

What does Penalty mean? In contract practice, a penalty (or penalty clause) is a term that, on breach, requires the defaulting party to pay money or suffer another detriment aimed at deterring non‑performance rather than providing a proportionate, pre‑agreed remedy. Across England & Wales, Scotland and Northern Ireland, the penalty rule is case law (not statutory), developed in Dunlop and refined in Cavendish v Makdessi/ParkingEye. A clause is penal and unenforceable if it imposes a detriment out of all proportion to the innocent party’s legitimate interest in performance or enforcement. The assessment is one of substance, not label, and is not limited to payments: forfeiture...

HMRC failure to notify penalties (FA 2008 Sch 41): prompted/unprompted disclosure, quality-based reductions, calculation methodology, agent considerations, and forthcoming behavioural penalty reforms

Published by a LexisNexis Tax expert

Practice notes

FORTHCOMING CHANGE relating to Penalty reform calls for evidence and behavioural penalties consultation :

Building on an earlier 2021 call for evidence, on 15 February 2024 HMRC issued a further call for evidence titled “The Tax Administration Framework Review: enquiry and assessment powers, penalties safeguards”, which set out potential routes to reform penalties, including changes to penalty suspension and escalation for ongoing or repeated non-Compliance. On 30 October 2024, HMRC published the outcome, providing a summary of responses and the government’s proposed next steps. Following this, at Spring Statement 2025 on 26 March 2025, the government launched a consultation on behavioural penalties relating to penalties for inaccuracies in returns and failure to notify. The consultation outlines two possible approaches to reform these regimes:

Refining the existing framework while simplifying how penalties are calculated and applied; and
Exploring a more fundamental redesign, creating a clear separation between penalties for inaccuracies and failure to notify, and introducing a tougher sanction for the most serious cases of deliberate non-compliance...

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Web page updated on 26/05/2026

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