CH70100 - Penalties for Failure to Notify: Overview
The law requires a person to tell HMRC when certain events happen. These events include
- where a person has income tax, capital gains tax or corporation tax to pay but has not been given notice to make a return for the period
- when a person starts a new taxable activity
- when the turnover from an existing activity has reached a certain level, or
- when the nature of the activity changes.
The nature and timing of each notification depends upon the tax and the nature of the activity and more than one may be needed. For example, a company which has been set up to brew beer may have to tell us separately that it has done so for the purposes of VAT and Alcoholic Liquor Duty and that it has corporation tax to pay.
Most people tell us about their new businesses or that they have tax to pay. Those who do not, or those who tell us late, may have to pay a financial penalty unless they have a reasonable excuse for not telling us on time.
Where the obligation to give us a notification arises on or after 1 April 2010, a new penalty regime will apply across most taxes and duties.
The amount of the penalty is a percentage of the tax
- that is unpaid at a specified date, or
- to which the person is liable for the relevant period.
This tax is known as the “potential lost revenue”. The percentage is determined by the behaviour that led to the failure to notify - higher penalties are payable if the failure was deliberate.
Reductions in the penalty percentage are given for disclosure and the amount of help the person gives us to arrive at the tax unpaid because of the failure.
We will issue a penalty assessment. The person can appeal and is entitled to a review. Where necessary the appeal will be heard by an independent tribunal, the First-tier Tribunal.
The penalty provisions in Sections 100 to 103 of TMA 1970 do not apply to a penalty under Schedule 41 FA 2008.
