Penalties for failure to notify

By Tolley in partnership with Philip Rutherford

The following Personal Tax guidance note by Tolley in partnership with Philip Rutherford provides comprehensive and up to date tax information covering:

Penalties for failure to notify
Introduction
Commencement of the provisions
When is a penalty chargeable?
Calculating the penalty – behaviour of the taxpayer
Calculating the penalty - potential lost revenue

Introduction

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.

FA 2008, Sch 41

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. See the Suspended penalties for inaccuracies in returns guidance note.

If a taxpayer has overseas matters which required notification to HMRC then these may attract specific penalties. See the Penalties for offshore matters guidance note.

Commencement of the provisions

The penalty regime under FA 2008, Sch