Penalty reductions for failure to notify a liability to tax
Produced in partnership with Philip Rutherford
Penalty reductions for failure to notify a liability to tax

The following Tax guidance note Produced in partnership with Philip Rutherford provides comprehensive and up to date legal information covering:

  • Penalty reductions for failure to notify a liability to tax
  • Prompted and unprompted disclosure
  • Quality of disclosure
  • Practical implications for agents
  • Method of calculation
  • Special reduction

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.

Under the rules in Schedule 41 to Finance Act 2008 (FA 2008), a taxpayer who fails to notify HMRC that they are chargeable to tax may be subject to a penalty.

The rate of the penalty is based on the behaviour of the taxpayer and whether the disclosure of the failure has been prompted or unprompted. This rate is then applied to