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HMRC have explained the failure to notify penalty contained in FA 2008, Sch 41, which, from 1 April 2010, can be applied to most taxes.
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 and the behaviour after the failure has been established.
Higher penalties are charged if the failure was deliberate, but the percentage can be reduced from the maximum for disclosure and the amount of help the person provides in establishing the amount of tax unpaid.
The new penalty is designed to address the behaviour that caused the failure so that, within the deliberate category, the law provides for higher penalties in the most serious cases where the person has failed to notify HMRC and has taken steps to conceal the need to notify.
HMRC say they want to encourage people to join the tax system, so if the failure is notified within 12 months of the tax becoming unpaid, the penalty for a non-deliberate failure to notify may be reduced.
The taxpayer is entitled to a review of, and can appeal against, HMRC’s decision as to whether a penalty is payable and as to its amount.
For more guidance on the penalty see Compliance Handbook at CH70000 and CH500000 - or click here for further explanation.
