The legislation creates a wide-ranging and complex penalty regime to encourage compliance. The main penalties are set out in this section. The defence of reasonable excuse can be used to mitigate some but not all of these penalties.
Failure to register or notify HMRC of activities
A failure to register or notify HMRC of a liability to register carries a penalty. From 1 April 2010, that penalty will be applied in accordance with the new penalties regime. If the failure is non-deliberate and the taxpayer has a reasonable excuse, no penalty will apply1.
If the failure to register or notify is non-deliberate and the taxpayer does not have a reasonable excuse, the penalty will be nil provided the failure is disclosed within 12 months to HMRC unprompted by their investigations or intended investigations. An unprompted disclosure after more than 12 months will carry a penalty of between 10% and 30% of the tax due.
A non-deliberate failure disclosed within 12 months when prompted will carry a penalty of 10%. After more than 12 months, this penalty will be between 20% and 30% of the tax due.
Deliberate failures to disclose are treated even more severely. A deliberate failure disclosed unprompted carries a penalty