Finance Act 2007

Part 1U.K.Liability for penalty

Error in taxpayer's documentU.K.

1(1)A penalty is payable by a person (P) where—U.K.

(a)P gives HMRC a document of a kind listed in the Table below, and

(b)Conditions 1 and 2 are satisfied.

(2)Condition 1 is that the document contains an inaccuracy which amounts to, or leads to—

(a)an understatement of [F1a] liability to tax,

(b)a false or inflated statement of a loss F2..., or

(c)a false or inflated claim to repayment of tax.

(3)Condition 2 is that the inaccuracy was [F3careless (within the meaning of paragraph 3) or deliberate on P’s part].

(4)Where a document contains more than one inaccuracy, a penalty is payable for each inaccuracy.

[F4(4A)In this paragraph “return under a special scheme” means any of the following, so far as relating to supplies of services treated as made in the United Kingdom—

(a)a special accounting return under paragraph 11 of Schedule 3B;

(b)a value added tax return submitted under any provision of the law of a member State other than the United Kingdom which implements Article 364 of the VAT Directive (as substituted by Article 5(11) of the Amending Directive);

(c)a value added tax return submitted under any provision of the law of a member State other than the United Kingdom which implements Article 369f of the VAT Directive (as inserted by Article 5(15) of the Amending Directive).

(4B)A value added tax return mentioned in paragraph (b) or (c) of sub-paragraph (4A) is regarded for the purposes of sub-paragraph (1) as given to HMRC when it is submitted to the authority to whom it is required to be submitted.

(4C)In sub-paragraph (4A)—

• “the VAT Directive” means Directive 2006/112/EC;

• “the Amending Directive” means Council Directive 2008/8/EC.]

[F5(5)In relation to a return under paragraph 2 of Schedule 2 to the Oil Taxation Act 1975 [F6or a statement or declaration under paragraph 13A of that Schedule], references in this Schedule to P include any person who, after the giving of the return for a taxable field (within the meaning of that Act), becomes the responsible person for the field (within the meaning of that Act).]

[F15Error in taxpayer's document attributable to another personU.K.

1A(1)A penalty is payable by a person (T) where—U.K.

(a)another person (P) gives HMRC a document of a kind listed in the Table in paragraph 1,

(b)the document contains a relevant inaccuracy, and

(c)the inaccuracy was attributable to T deliberately supplying false information to P (whether directly or indirectly), or to T deliberately withholding information from P, with the intention of the document containing the inaccuracy.

(2)A “relevant inaccuracy” is an inaccuracy which amounts to, or leads to—

(a)an understatement of a liability to tax,

(b)a false or inflated statement of a loss, or

(c)a false or inflated claim to repayment of tax.

(3)A penalty is payable under this paragraph in respect of an inaccuracy whether or not P is liable to a penalty under paragraph 1 in respect of the same inaccuracy.]

Under-assessment by HMRCU.K.

2(1)A penalty is payable by a person (P) where—U.K.

(a)an assessment issued to P by HMRC understates P's liability to [F16a relevant tax], and

(b)P has failed to take reasonable steps to notify HMRC, within the period of 30 days beginning with the date of the assessment, that it is an under-assessment.

(2)In deciding what steps (if any) were reasonable HMRC must consider—

(a)whether P knew, or should have known, about the under-assessment, and

(b)what steps would have been reasonable to take to notify HMRC.

[F17(3)In sub-paragraph (1) “relevant tax” means any tax mentioned in the Table in paragraph 1.]

[F18(4)In this paragraph (and in Part 2 of this Schedule so far as relating to this paragraph)—

(a)“assessment” includes determination, and

(b)accordingly, references to an under-assessment include an under-determination.]

Degrees of culpabilityU.K.

3(1)[F19For the purposes of a penalty under paragraph 1, inaccuracy in] a document given by P to HMRC is—U.K.

(a)“careless” if the inaccuracy is due to failure by P to take reasonable care,

(b)“deliberate but not concealed” if the inaccuracy is deliberate [F20on P's part] but P does not make arrangements to conceal it, and

(c)“deliberate and concealed” if the inaccuracy is deliberate [F20on P's part] and P makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure).

(2)An inaccuracy in a document given by P to HMRC, which was neither careless nor deliberate [F21on P's part] when the document was given, is to be treated as careless if P—

(a)discovered the inaccuracy at some later time, and

(b)did not take reasonable steps to inform HMRC.