Penalties for failure to notify

The onus is on the taxpayer to inform HMRC of the chargeability to tax. Each of the taxes have different legislative provisions, but the common theme is that a taxpayer must notify HMRC when certain criteria are met, including (but not limited to):

• •becoming liable to income tax, corporation tax or capital gains tax (for example, a new source of income such property income)
• •beginning a new activity which will lead to a tax liability (for example setting up a new trade), or
• •reaching certain thresholds (for example, the statutory limits for VAT registration)

As each tax has separate requirements, these are discussed below. It also follows that a taxpayer may have separate notification requirements for different taxes. For example, a taxpayer may have to notify HMRC of a liability to corporation tax and VAT separately, on different dates, or risk attracting a penalty for late notification of each.

Finance Act 2008 sought to set out a coherent and harmonised penalty regime across all taxes. The penalties for failure to notify saw significant changes, with a potential penalty charged based on the behaviour of the taxpayer and the amount of tax outstanding.

If a taxpayer fails to meet the obligation to notify HMRC, then a penalty may be due. There is no facility for the penalty to be suspended, unlike the situation where certain penalties are charged for inaccuracies in returns.

If a taxpayer has overseas matters which required notification to HMRC, then these may attract specific penalties.

The penalty regime under FA 2008, Sch 41 applies where the requirement to notify HMRC arises on or after 1 April 2010.