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V2a. New penalties for failure to submit return
POINTS SYSTEM
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Penalty where person has maximum number of points
"(1) If a person fails to make a return on or before the due date and condition A or condition B is met, the person is liable to a penalty (but see sub-paragraphs (5) and (9)).
(2) Condition A is that—
(a)the person is awarded a penalty point in respect of the failure (including where the penalty point is awarded in respect of the failure and another failure or other failures), and
(b) on being awarded that penalty point, or on being awarded after that failure a penalty point in respect of an earlier failure (or earlier failures), the person has the maximum number of penalty points for the group of returns to which the return belongs.
(3) Condition B is that the failure occurs on a day on which the person has the maximum number of penalty points for the group of returns to which the return belongs.
(4) The amount of a penalty under this paragraph is £200." (FA 2021, Sch 24, para 15)
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- Up to one penalty per month within each digital reporting sub-group
"(5) A person is not liable to more than one penalty per month in respect of a failure to make a return in a digital reporting sub-group of returns, even if in that month there is more than one failure to make a return in that digital reporting sub-group on or before the due date.
(6) For the purposes of sub-paragraph (5), digital reporting sub-groups (1) and (2) of group 1B or 2B are to be treated as a single digital reporting sub-group." (FA 2021, Sch 24, para 15)
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Penalty is for all failures
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"(9) If there is more than one failure in a month or calendar quarter (as the case may be) to make a return in a digital reporting sub-group of returns on or before the due date (see sub-paragraphs (5) and (7)), the one penalty for the month or calendar quarter to which the person is liable by virtue of this paragraph is for all of those failures." (FA 2021, Sch 24, para 15)
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- Maximum number of points
"(9)The maximum number of penalty points for a group of returns is—
(a)if the group is in Column A of the Table, 2 points,
(b)if the group is in Column B of the Table, 4 points, and
(c)if the group is in Column C of the Table, 5 points." (FA 2021, Sch 24, para 5)
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- Multiple businesses on different staggers: up to one penalty per quarter within each digital reporting sub-group
"(7) If—
(a) a person carries on more than one business and in relation to two or more of those businesses is required to make returns belonging to digital reporting sub-group (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, and
(b) the due dates for the returns belonging to the digital reporting sub-group in question do not all fall within the same month of a calendar quarter,
sub-paragraph (5) is to be read in relation to that digital reporting sub-group as if references to a month were references to a calendar quarter.
(8) “Calendar quarter” means a period of 3 months beginning with 1 January, 1 April, 1 July or 1 October." (FA 2021, Sch 24, para 15)
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Liability to penalty points
"(1)If a person fails to make a return on or before the due date, the person is liable to one penalty point for the group of returns to which the return belongs (but see sub-paragraphs (2) to (8))." (FA 2021, Sch 24, para 5)
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- When a person has a penalty point (awarded, not cancelled or expired)
"(10) For the purposes of this Schedule, a person “has” a penalty point if HMRC has awarded the person the penalty point, the penalty point or liability to it has not been cancelled and the penalty point has not expired." (FA 2021, Sch 24, para 6)
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- Limit to one penalty point per month/quarter per group
(2)A person is not liable to more than one penalty point per month for each of the following groups of returns, even if in that month there is more than one failure to make a return in that group on or before the due date—
(a)group 1A, 2A or 3A;
(b)group 4A, 4B or 4C.
(3)A person is not liable to more than one penalty point per month in respect of a failure to make a return in a digital reporting sub-group of returns, even if in that month there is more than one failure to make a return in that digital reporting sub-group on or before the due date.
(4)For the purposes of sub-paragraph (3), digital reporting sub-groups (1) and (2) of group 1B or 2B are to be treated as a single digital reporting sub-group.
(5)If—
(a)a person carries on more than one business and in relation to two or more of those businesses is required to make returns belonging to digital reporting sub-group (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, and
(b)the due dates for the returns belonging to the digital reporting sub-group in question do not all fall within the same month of a calendar quarter,
sub-paragraph (3) is to be read in relation to that digital reporting sub-group as if references to a month were references to a calendar quarter.
(6)“Calendar quarter” means a period of 3 months beginning with 1 January, 1 April, 1 July or 1 October.
(7)If there is more than one failure in a month or calendar quarter (as the case may be) to make a return in a group of returns, or in a digital reporting sub-group of returns, on or before the due date (see sub-paragraphs (2), (3) and (5)), the one penalty point for the month or calendar quarter to which the person is liable by virtue of this paragraph is for all of those failures." (FA 2021, Sch 24, para 5)
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- No penalty point where person already has maximium
"(8)A person is not liable to a penalty point for a group of returns if the person already has the maximum number of penalty points for that group of returns.
(9)The maximum number of penalty points for a group of returns is—
(a)if the group is in Column A of the Table, 2 points,
(b)if the group is in Column B of the Table, 4 points, and
(c)if the group is in Column C of the Table, 5 points." (FA 2021, Sch 24, para 5)
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Reasonable excuse
"(1)Liability to a penalty point or a penalty under this Schedule does not arise in respect of a failure to make a return if the person satisfies HMRC (or on appeal, the tribunal) that the person had a reasonable excuse for the failure.
(2)For this purpose—
(a)an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control,
(b)where the person relies on another person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and
(c)where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased." (FA 2021, Sch 24, para 19)
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Award of penalty points
"(1) Where a person is liable to a penalty point for a group of returns, HMRC may award the person a penalty point for that group." (FA 2021, Sch 24, para 6)
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- Notice of award
"(2) Where HMRC award a penalty point they must notify the person, and state in the notice—
(a) the failure (or failures) in respect of which the penalty point is awarded, and
(b) the group of returns for which the penalty point is awarded." (FA 2021, Sch 24, para 6)
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- Time limit for awarding points
"(3) HMRC may not award a penalty point after—
(a) the later of date A and (where it applies) date B, or
(b) where the penalty point is to be awarded in respect of a failure (or failures) to make, on or before the due date, a return in digital reporting sub-group (3) or (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, the later of date A and (where it applies) date C." (FA 2021, Sch 24, para 6)
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Date A
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"(4) Date A is the end of the period of x weeks beginning with—
(a)if the penalty point is to be awarded in respect of a single failure, the day on which the failure occurred;
(b)if the penalty point is to be awarded in respect of more than one failure in the same month or, as the case may be, the same calendar quarter (see paragraph 5(7)), the day on which the latest of those failures occurred.
(5)In sub-paragraph (4) “x weeks” means—
(a)if the group of returns is in Column A of the Table, 48 weeks,
(b)if the group of returns is in Column B of the Table, 11 weeks, and
(c)if the group of returns is in Column C of the Table, 2 weeks." (FA 2021, Sch 24, para 6)
Date B
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"(6)Date B is the last day of the period of 12 months beginning with—
(a)the end of the appeal period for the assessment of the liability to tax which would have been shown in the relevant return, or
(b)if there is no such assessment, the date on which that liability is ascertained or it is ascertained that the liability is nil.
(7)In sub-paragraph (6)(a)—
“appeal period” means the period during which—
(a)
an appeal could be brought (ignoring any possibility of an appeal out of time), or
(b)
an appeal that has been brought has not been determined or withdrawn;
“relevant return” means—
(a)
if the penalty point is to be awarded in respect of a single failure to make a return on or before the due date, that return;
(b)
if the penalty point is to be awarded in respect of more than one failure to make a return, on or before the due date, in the same month or, as the case may be, the same calendar quarter (see paragraph 5(7)), the return for which there was the latest due date in the period in question.
(8)If more than one return is the relevant return by virtue of paragraph (b) of the definition of “relevant return” in sub-paragraph (7) and the same day is not date B in relation to all of those returns, treat date B as being the latest of those days." (FA 2021, Sch 24, para 6)
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Date C
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(9)Date C—
(a)applies where, on date A, it was not reasonable to expect HMRC to be aware that the person was required to make the return (or the returns), and
(b)is the last day of the period of 12 months beginning with the first day on which it was reasonable to expect HMRC to be aware that the person was required to make the return (or one of the returns)." (FA 2021, Sch 24, para 6)
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Expiry of points
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- Expiry of individual points after 2 years
"(1)A penalty point for a group of returns expires at the end of the relevant period, unless immediately before the end of that period the person has the maximum number of penalty points for that group of returns.
(2)The relevant period is—
(a)the period of 24 months beginning with the first day of the month after the month in which the failure or failures, in respect of which the point was awarded, occurred, or
(b)where paragraph 6(3)(b) applied to the award of the point and the point was awarded after date A and on or before date C, the period of 24 months beginning with the day after the day on which the point was awarded.
(3)Where the penalty point was awarded in respect of more than one failure by virtue of paragraph 5(5), the references in sub-paragraph (2)(a) to a month are to be read as references to a calendar quarter.
(4)In this paragraph—
“calendar quarter” has the meaning given by paragraph 5(6);
“date A” and “date C” have the meanings given by paragraph 6." (FA 2021, Sch 24, para 7)
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- Expiry of all points for group of returns
"(1) Each of a person's penalty points for a group of returns expires at the beginning of the first day on which both condition A and condition B are met.
(2) Condition A is that the person has made each return in the group on or before its due date for the relevant length of time (or longer).
(3) The relevant length of time is x months beginning with the first day of the month after the month in which the most recent failure to make a return in the group on or before its due date occurred.
(4)In sub-paragraph (3) “x months” means—
(a)if the group of returns is in Column A of the Table, 24 months,
(b)if the group of returns is in Column B of the Table, 12 months, and
(c)if the group of returns is in Column C of the Table, 6 months.
(5)Condition B is met on any day if the person has made all the returns in the group whose due date fell in the period of 24 months ending with the previous day (whether or not those returns were made on or before their due date).
(6)Where each of a person's penalty points for a group of returns expires under this paragraph, HMRC must notify the person." (FA 2021, Sch 24, para 8)
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Assessment of penalty
"(1)Where a person is liable to a penalty under this Schedule HMRC may assess the penalty.
(2)Where HMRC assess a penalty they must—
(a)notify the person, and
(b)state in the notice the failure (or, where paragraph 15(9) applies, the failures) for which the person is liable to a penalty.
(3)Where a person is liable to a penalty because condition A in paragraph 15 is met, notice of an assessment of the penalty may not be issued before (but may be issued at the same time as) notice under paragraph 6 of the award of the penalty point as a result of which the person is liable to the penalty.
(4)A penalty under this Schedule must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(5)An assessment of a penalty under this Schedule—
(a)is to be treated for procedural purposes in the same way as an assessment to the tax concerned (except in respect of a matter expressly provided for in this Schedule),
(b)may be enforced as if it were an assessment to the tax concerned, and
(c)may be combined with an assessment to the tax concerned." (FA 2021, Sch 24, para 16)
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- Time limit for assessment (2 years of failure/1 year of liability being ascertained/1 year HMRC aware of failure)
"(1)An assessment of a penalty under this Schedule may not be made after—
(a)the later of date A and (where it applies) date B, or
(b)where the penalty is to be assessed in respect of a failure (or failures) to make, on or before the due date, a return in digital reporting sub-group (3) or (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, the later of date A and (where it applies) date C.
(But see sub-paragraphs (7) and (8).)" (FA 2021, Sch 24, para 17)
Date A
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(2)Date A is the end of the period of 2 years beginning with—
(a)if the penalty is to be assessed in respect of a single failure, the day on which the failure occurred;
(b)if the penalty is to be assessed in respect of more than one failure in the same month or, as the case may be, the same calendar quarter (see paragraph 15(9)), the day on which the latest of the failures occurred.
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Date B
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(3)Date B is the last day of the period of 12 months beginning with—
(a)the end of the appeal period for the assessment of the liability to tax which would have been shown in the relevant return, or
(b)if there is no such assessment, the date on which that liability is ascertained or it is ascertained that the liability is nil.
(4)In sub-paragraph (3)(a)—
“appeal period” means the period during which—
(a) an appeal could be brought (ignoring any possibility of an appeal out of time), or
(b) an appeal that has been brought has not been determined or withdrawn;
“relevant return” means—
(a) if the penalty is to be assessed in respect of a single failure to make a return on or before the due date, that return;
(b) if the penalty is to be assessed in respect of more than one failure to make a return, on or before the due date, in the same month or, as the case may be, the same calendar quarter (see paragraph 15(9)), the return for which there was the latest due date in the period in question.
(5)If more than one return is the relevant return by virtue of paragraph (b) of the definition of “relevant return” in sub-paragraph (4) and the same day is not date B in relation to all of those returns, treat date B as being the latest of those days.
Date C
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(6)Date C—
(a)applies where, on date A, it was not reasonable to expect HMRC to be aware that the person was required to make the return (or the returns), and
(b)is the last day of the period of 12 months beginning with the first day on which it was reasonable to expect HMRC to be aware that the person was required to make the return (or one of the returns).
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- Delayed award of earlier penalty
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"(7)Sub-paragraph (8) applies where—
(a)a person is liable to a penalty in respect of a failure to make a return because condition A in paragraph 15 is met,
(b)that condition is only met because the person has the maximum number of penalty points for the group of returns to which the return belongs on being awarded after that failure a penalty point in respect of an earlier failure (or earlier failures), and
(c)when the penalty point is awarded in respect of the earlier failure (or earlier failures) an assessment of the penalty to which the person is liable may no longer be made because of sub-paragraph (1).
(8)Where this sub-paragraph applies—
(a)sub-paragraph (1) does not apply, and
(b)the assessment of the penalty may instead be made during the period of 12 months beginning with the first day on which it was reasonable to expect HMRC to be aware of the earlier failure (or one of the earlier failures)." (FA 2021, Sch 24, para 17)
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DELIBERATELY WITHHOLDING INFORMATION BY NOT SUBMITTING RETURN
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Penalty for deliberately withholding information by failing to submit return
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"(1) A person who fails to make a return on or before the due date is liable to a penalty under this paragraph if (and only if) the condition in sub-paragraph (2) is met.
(2) The condition is that at any time (including any time after the due date), by failing to make the return, the person deliberately withholds information which would enable or assist HMRC to assess the person's liability to tax." (FA 2021, Sch 25, para 3)
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Quantum​
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- Deliberate and concealed​
"(3)If the withholding of the information is deliberate and concealed, the penalty is—
(a)the relevant percentage of any liability to tax which would have been shown in the return in question, or
(b)if the amount in paragraph (a) is less than £300, £300.
(4)For the purposes of sub-paragraph (3)(a) the relevant percentage is—
(a)for the withholding of category 1 information, 100%,
(b)for the withholding of category 2 information, 150%, and
(c)for the withholding of category 3 information, 200%." (FA 2021, Sch 25, para 3)
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- Deliberate but not concealed​
"(5)If the withholding of the information is deliberate but not concealed, the penalty is—
(a)the relevant percentage of any liability to tax which would have been shown in the return in question, or
(b)if the amount in paragraph (a) is less than £300, £300.
(6)For the purposes of sub-paragraph (5)(a) the relevant percentage is—
(a)for the withholding of category 1 information, 70%,
(b)for the withholding of category 2 information, 105%, and
(c)for the withholding of category 3 information, 140%." (FA 2021, Sch 25, para 3)
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- Meaning of concealed (arrangements to conceal information being withheld)
"(8)The withholding of information by a person is—
(a)deliberate and concealed, if the person deliberately withholds the information and makes arrangements to conceal the fact that the information has been withheld;
(b)deliberate but not concealed, if the person deliberately withholds the information but does not make arrangements to conceal the fact that the information has been withheld." (FA 2021, Sch 25, para 3)
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Reduction for disclosure
"(1)If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table in this paragraph (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.
(2)But the standard percentage may not be reduced to a percentage that is below the minimum shown for it—
(a)in the case of a prompted disclosure, in column 2 of the Table, and
(b)in the case of an unprompted disclosure, in column 3 of the Table.
...
(3)But HMRC must not under this paragraph reduce a penalty below £300." (FA 2021, Sch 25, para 8)
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- Meaning of disclosure
"(2)A person discloses relevant information that involves a domestic matter by—
(a)telling HMRC about it,
(b)giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld, and
(c)allowing HMRC access to records for the purpose of checking how much tax is so unpaid.
(3)A person discloses relevant information that involves an offshore matter or an offshore transfer by—
(a)telling HMRC about it,
(b)giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld,
(c)allowing HMRC access to records for the purpose of checking how much tax is so unpaid, and
(d)providing HMRC with additional information.
(4)The Treasury must make regulations setting out what is meant by “additional information” for the purposes of sub-paragraph (3)(d).
(5)Disclosure of relevant information—
(a)is “unprompted” if made at a time when the person has no reason to believe that HMRC have discovered or are about to discover the relevant information, and
(b)otherwise, is “prompted”.
(6)In relation to disclosure “quality” includes timing, nature and extent." (FA 2021, Sch 25, para 7)
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Special reduction
"(1)If HMRC think it right because of special circumstances, they may reduce a penalty under this Schedule.
(2)In sub-paragraph (1) “special circumstances” does not include—
(a)ability to pay, or
(b)the fact that a potential loss of revenue from a taxpayer is balanced by a potential over-payment by a taxpayer.
(3)In sub-paragraph (1) the reference to reducing a penalty includes a reference to—
(a)staying a penalty, and
(b)agreeing a compromise in relation to proceedings for a penalty." (FA 2021, Sch 25, para 9)
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