Penalties

Various penalties may be chargeable in the course of or at the end of a compliance check, either for failures to comply with information and inspection notices, record-keeping failures or for inaccuracies discovered in returns. The penalties that might be charged for are:-

  • A standard penalty for failing to comply with an information or inspection notice

  • A daily penalty for a continuing failure to comply with an information or inspection notice

  • A penalty for failing to keep proper records

  • A penalty for inaccuracies in a return

There is a right of appeal against standard and daily penalties, but not against a tax-related penalty imposed on the authority of the Tribunal.

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Alternative to Daily Penalty

The officer will consider other ways of obtaining information or documents that could be requested in an information notice.

By amending a return or raising an assessment in figures that can be justified before the Tribunal, in any appeals proceedings the onus passes to the taxpayer to show why the figures are incorrect.

The Tribunal may direct that the information or documents the officer wanted to see should be produced to HMRC before the appeal can be heard or the taxpayer may have to produce them at the hearing to support their appeal.

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Daily Penalty

FA 2008, Sch. 36, para. 38 provides for a daily penalty where a standard penalty under para. 37 has been imposed and the delay continues. The penalty is up to a maximum of £60 a day for as long as the delay continues.

Officers are instructed to consider charging a daily penalty 30 days after a standard penalty has been charged and then at the end of each subsequent 30-day period.

In determining the amount of a daily penalty the officer will take account of:-

  • The amount of tax at stake

  • The nature and extent of the obstruction

  • The nature and extent of the information and documents requested and the difficulty of providing them

  • The taxpayer’s co-operation with the compliance check and their general compliance history.

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Standard Penalty

There is a standard penalty provided for in FA 2008, Sch. 36, para. 37. This is charged if a person:-

  • Fails to comply with an information notice, which includes concealing, destroying or disposing of a documents that is subject to an information notice or that has been notified to the taxpayer as subject to or likely to be subject to an information notice

  • Deliberately obstructs a Tribunal-approved inspection.

The standard penalty is £300. A notification of a Tribunal-approved inspection or for the production of documents warns the taxpayer that a penalty will be charged for failing to comply. If they obstruct a tribunal-approved inspection or destroy documents required by a notice, therefore, the penalty will be charged automatically. Otherwise, they will be given 14 days’ notice of the penalty if their failure continues.

The taxpayer has a defence of reasonable excuse for their failure or obstruction.

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Tax-Related Penalty

If the tax has been lost due to poor record keeping the officer may consider it appropriate to charge a tax-related penalty for inaccuracy as well as a penalty for failing to keep proper records.

The officer may decide not to charge the penalty for poor records immediately and to suspend the penalty for inaccuracy. They will warn the taxpayer that a failure to improve the records will result in a penalty for failing to keep proper records, on top of which the suspended penalty for inaccuracy will also become due. If there is mo improvement at the end of the period of suspension both penalties will become chargeable.

Officers are instructed that where the taxpayer has deliberately destroyed documents they should consider imposing a tax-related penalty instead of daily penalties.

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