Penalties for failure to notify a liability to tax
Penalties for failure to notify a liability to tax

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Penalties for failure to notify a liability to tax
  • When is a penalty chargeable?
  • Calculating the penalty—behaviour of the taxpayer
  • Calculating the penalty—potential lost revenue

FORTHCOMING CHANGE: HMRC has consulted on proposals to amend the rules in Schedule 41 to the Finance Act 2008 on penalties for failure to notify, as part of a number of measures aimed at 'tackling the hidden economy'. The intention is to deter repeated non-compliance by increasing the penalties for second or subsequent failures to notify. HMRC has suggested two options for achieving this: the first option is increased penalty percentages for a second or subsequent failure to notify; the second option is to impose penalties for repeated failures at the same rates as those currently applying to deliberate failures. It would continue to be the case that taxpayers with a reasonable excuse for their failure would not receive a penalty. The government recommitted, in the summary of responses released on 20 March 2017, to considering the design of failure to notify penalties in the hidden economy as part of its wider penalties review, but without committing to a timeframe.

It is the responsibility of the taxpayer to inform HMRC that they are chargeable to tax. Each of the taxes has different legislative provisions, but the common theme is that a taxpayer must notify HMRC when certain criteria are met, including (but not limited to):

  1. becoming liable to income tax, corporation tax or capital gains tax (for example when the taxpayer