Chapter 3 – Penalties
Section 46 – Power of local authorities to impose penalties
88.This section contains a power allowing a local authority which has introduced a VL scheme to impose penalties on certain persons in accordance with the provisions in this Chapter. This is a discretionary power which allows local authorities to decide whether or not to impose a penalty where liability arises under a particular section in this Chapter.
Sections 47 to 50 – Penalties for failure to make returns
89.Section 47 provides that a liable person who fails to make a return as required by section 23 is liable to a penalty as determined by a relevant local authority. Sections 48 to 50 contain additional penalties as determined by a relevant local authority and which a local authority may impose regarding a failure to make a return in cases where the failure continues for 3 months (section 48), 6 months (section 49), or 12 months (section 50). Liability arises under sections 47 to 50 according to the timeframes mentioned in those sections and so if a liable person has not made a return after 12 months, liability to a penalty, as determined by a relevant local authority, arises under each of sections 47, 48, 49 and 50, and the local authority may choose to impose all, some or none of the penalties set out in those sections.
Section 51 – Reasonable excuse for failure to make returns
90.This section provides that no liability to a penalty arises under sections 47 to 50 where a person who has failed to comply with the duty in section 26 has a reasonable excuse for the failure (subsection (1)). An insufficiency of funds is not a reasonable excuse (subsection (2)(a)), nor is that the person relied on another person to do things (unless the person who failed to comply took reasonable care to avoid the failure – subsection (2)(b)). Examples of things which may qualify as a reasonable excuse include serious unexpected illness, an unforeseen collapse of a third party’s IT system (meaning that a return could not be sent), or the liable person's office being destroyed by fire. Where the reasonable excuse ceases to apply, the person who failed to comply with section 26 is still able to rely on the excuse, provided the failure is remedied without unreasonable delay (subsection (2)(c)).
Section 52 – Penalty for failure to pay levy
91.Section 52 provides that a liable person who fails to pay the total amount of the levy as required by section 29 is liable to pay a penalty as determined by a relevant local authority (subsections (1)(a) and (2)). Additional penalties (as determined by a relevant local authority) are payable where any amount of the total amount of the levy remains unpaid after 5 months (subsection (3)) and 11 months (subsection (4)). Liability to pay a penalty under this section only arises where the local authority has issued a reminder that payment is due and 14 days pass without payment being made (subsection (1)(b) and (c)).
Section 53 – Reasonable excuse for failure to pay levy
92.This section provides that no liability to a penalty arises under section 52 where a person who has failed to comply with the duty in section 29 has a reasonable excuse for the failure (subsection (1)). An insufficiency of funds is not a reasonable excuse (subsection (2)(a)), nor is that the person relied on another person to do things (unless the person who failed to comply took reasonable care to avoid the failure – subsection (2)(b)). Examples of things which may qualify as a reasonable excuse include serious unexpected illness, an unforeseen collapse of a third party’s IT system (meaning that levy could not be paid), or the liable person's office being destroyed by fire. Where the reasonable excuse ceases to apply, the person who failed to comply with section 29 is still able to rely on the excuse, provided the failure is remedied without unreasonable delay (subsection (2)(c)).
Section 54 – Penalty for failure to keep and preserve records
93.This section provides that a person who fails to comply with the duty in section 28 to keep and preserve records is liable to a penalty as determined by a relevant local authority (subsection (1)). The duty to keep and preserve records under section 28 falls on the liable person and any person who has entered into an arrangement under section 9 to make returns on behalf of the liable person. But no penalty is incurred under this section if the person provides other documentary evidence of relevant facts to the satisfaction of the local authority (subsection (2)).
Section 55 – Reasonable excuse for failure to keep and preserve records
94.This section provides that no liability to a penalty arises under section 54 where a person who has failed to comply with the duty in section 28 has a reasonable excuse for the failure (subsection (1)). An insufficiency of funds is not a reasonable excuse (subsection (2)(a)), nor is that the person relied on another person to do things (unless the person who failed to comply took reasonable care to avoid the failure – subsection (2)(b)). An example of a reasonable excuse here may be where the liable person's office is destroyed by fire. Where the reasonable excuse ceases to apply, the person who failed to comply with section 28 is still able to rely on the excuse, provided the failure is remedied without unreasonable delay (subsection (2)(c)).
Section 56 – Penalties for failure to comply or obstruction
95.A person who fails to comply with an information notice issued under section 30 or 31 or who obstructs an authorised officer in the course of an inspection is liable to a penalty as determined by a relevant local authority (subsections (1) and (2)). The penalty under this section also applies to a person who conceals, destroys or disposes of a document in breach of sections 60 or 61 (subsection (3)).
Section 57 – Daily default penalties for failure to comply or obstruction
96.Where a person receives a penalty under section 56, but the failure to comply or the obstruction mentioned in that section continues, the person is liable under this section to further penalties as determined by a relevant local authority for each day that the failure to comply or obstruction continues.
Section 58 – Reasonable excuse for failure to comply or obstruction
97.This section provides that no liability to a penalty arises under sections 56 or 57 where a person has a reasonable excuse for the failure to comply or the obstruction (subsection (1)). An insufficiency of funds is not a reasonable excuse (subsection (2)(a)), nor is that the person relied on another person to do things (unless the person who failed to comply or was responsible for the obstruction took reasonable care to avoid the failure or obstruction – subsection (2)(b)). While it will depend on the precise circumstances, examples of things which may qualify as a reasonable excuse include serious unexpected illness, an unforeseen collapse of a person’s IT system (meaning that information or documents could not be provided), or the person’s office being unsafe for the officer to enter (because of damage caused by fire or flooding for example). Where the reasonable excuse ceases to apply, the person who failed to comply or was responsible for the obstruction is still able to rely on the excuse, provided the failure is remedied, or the obstruction stops, without unreasonable delay (subsection (2)(c)).
Section 59 – Penalties for inaccurate information or documents
98.A person who, in response to an information notice issued under section 30 or 31, provides inaccurate information, or produces a document containing an inaccuracy is liable under this section to a penalty as determined by a relevant local authority in respect of each inaccuracy (subsections (1)(a), (6) and (7)). Liability for a penalty only arises where the inaccuracy is careless or deliberate, or the person knew of the inaccuracy at the time and did not inform the local authority, or discovers the inaccuracy later and fails to take reasonable steps to inform the local authority (subsections (1)(b) and (2) to (5)).
Section 60 – Concealing, destroying etc. documents following information notice
99.This section provides that a person in receipt of an information notice issued under section 30 or 31 must not conceal, destroy or dispose of a document to which the notice relates (subsection (1)). But a person may do so after the document has been produced to an authorised officer (but not if they have been told to continue to make the document available for inspection) (subsection (2)). In a case where section 33 applies (i.e. a person complies with an information notice by providing a copy of the document), the effect of subsection (3) is that a person is free to destroy or dispose of the original document to which the information notice relates, provided they do so at least 6 months after the copy of the document was produced (unless, before then, an authorised officer requests the original document under section 33(2)(b)). The penalty applying to an act of concealing, destroying or disposing of a document in contravention of this section is as determined by a relevant local authority (see section 56(2) and (3)).
Section 61 – Concealing, destroying etc. documents following information notification
100.This section provides that a person must not conceal, destroy or dispose of any document which an authorised officer has notified is to be, or is likely to be, the subject of an information notice (subsection (1)). However, if at least 6 months have passed since that notification was given, the person may conceal, destroy or dispose of the document (subsection (2)(a)). The prohibition in subsection (1) does not apply where an information notice has been given to the person requiring the document to be produced (subsection (2)(b); but in such a case, section 60 will apply to prohibit the person from concealing, destroying or disposing of the document). The penalty applying to an act of concealing, destroying or disposing of a document in contravention of this section is as determined by a relevant local authority (see section 56(2) and (3)).
Section 62 – Assessment of penalties
101.This section deals with the assessment of penalties under this Chapter. Where a person becomes liable for a penalty and the local authority choose to impose it, subsection (1) requires the local authority to assess the penalty (to ascertain the amount of penalty due) and notify the person that the penalty is due. That assessment must be made within 12 months of the person becoming liable to the penalty (subsection (3)), or, as regards a penalty under section 59 (penalties for inaccurate information or documents), within 12 months of the inaccuracy first coming to the attention of an authorised officer and within 6 years of the person becoming liable to the penalty (subsection (5)). But if the penalty is one relating to an information notice which may be appealed, the assessment under section 56 or 57 (penalties for failure to comply or obstruction) is to be carried out within 12 months of the end of any period in which notice of an appeal may be given, or if an appeal is made, within 12 months of the date on which the appeal is determined or withdrawn (subsection (4)). The obligation to pay the penalty does not arise until notification of the penalty is issued under subsection (2)(b).
Section 63 – Enforcement of penalties
102.This section provides that a penalty under this Chapter is to be paid within 30 days of the notification of the penalty.
Section 64 – Failure to comply with time limit
103.This section provides that a person who fails to comply with a time-limited requirement does not become liable for a penalty under section 56 or 57 (penalties for failure to comply or obstruction) if they comply with the requirement within a further period allowed by the authorised officer.
Section 65 – Power of local authorities to reduce, suspend or waive penalties
104.Under this section, a local authority may waive or suspend a penalty, or agree a compromise in relation to proceedings for the penalty, where special circumstances apply (subsections (1) and (3)). But the ability of the person to pay the penalty is not to be regarded as a special circumstance (subsection (2)). Subsection (4) confirms that the power of a local authority under this section applies not only to the penalty, but to any interest in relation to the penalty.
Section 66 – Interest on unpaid levy
105.This section provides that interest is payable on the amount of any unpaid levy from the day after the date on which the levy must be paid under section 29 (subsection (1)). Where an amount of unpaid levy is paid to the local authority, interest is payable only on the remainder of unpaid levy (subsection (2)). The rate of interest applicable is that specified in regulations made under section 68 (subsection (3)).
Section 67 – Interest on penalties
106.This section provides that interest is payable on the amount of any unpaid penalty from the date on which the penalty must be paid until it is paid (subsection (1)). The rate of interest applicable is that specified in regulations made under section 68 (subsection (2)).
Section 68 – Rate of interest
107.The rates of interest which are to apply to unpaid levy or unpaid penalties are to be specified in regulations made by the Scottish Ministers under this section (subsection (1)). Different rates can be specified for different penalties, and provision can be made for the alteration of rates of interest (subsection (2)). Regulations made under this section are subject to the negative procedure (subsection (3)).
Section 69 – Power to change penalty provisions
108.This section gives the Scottish Ministers power to make further provision by regulations about penalties, including making amendments to this Act or other legislation (subsections (1) and (4)). Provision which can be made includes provision about the circumstances in which a penalty is payable, the amounts of the penalties, issuing procedures and enforcement of penalties (subsection (2)), but the power cannot be used to create criminal offences (subsection (3)). Regulations made under this section are subject to the affirmative procedure (subsection (6)).
