3(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.U.K.
(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.
(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%.
(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%.
(7)Paragraph 4 explains the categories of information.
(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.
(9)See paragraphs 15 and 16 for further rules about liability to a penalty.
Commencement Information
I1Sch. 25 para. 3 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
4(1)Information is category 1 information if—U.K.
(a)it involves a domestic matter, or
(b)it involves an offshore matter and the territory in question is a category 1 territory.
(2)Information is category 2 information if—
(a)it involves an offshore matter or an offshore transfer,
(b)the territory in question is a category 2 territory, and
(c)it is information which would enable or assist HMRC to assess the person's liability to the tax in question.
(3)Information is category 3 information if—
(a)it involves an offshore matter or an offshore transfer,
(b)the territory in question is a category 3 territory, and
(c)it is information which would enable or assist HMRC to assess the person's liability to the tax in question.
(4)Information “involves an offshore matter” if the liability to tax which would have been shown in the return includes a liability to tax charged on or by reference to—
(a)income arising from a source in a territory outside the UK,
(b)assets situated or held in a territory outside the UK,
(c)activities carried on wholly or mainly in a territory outside the UK, or
(d)anything having effect as if it were income, assets or activities of a kind described above.
(5)Information “involves an offshore transfer” if—
(a)it does not involve an offshore matter,
(b)it is information which would enable or assist HMRC to assess the person's liability to the tax in question,
(c)by failing to make the return, the person deliberately withholds the information (whether or not the withholding of the information is also concealed), and
(d)the applicable condition in paragraph 6 is satisfied.
(6)Information “involves a domestic matter” if it does not involve an offshore matter or an offshore transfer.
(7)If the information which the person withholds falls into more than one category—
(a)the person's failure to make the return is to be treated for the purposes of this Schedule as if it were separate failures, one for each category of information according to the matters or transfers which the information involves, and
(b)for each separate failure, the liability to tax which would have been shown in the return in question is taken to be such share of the liability to tax which would have been shown in the return mentioned in paragraph (a) as is just and reasonable.
(8)For the purposes of this Schedule—
(a)paragraph 21A of Schedule 24 to FA 2007 (classification of territories) has effect, but
(b)an order under that paragraph does not apply to a failure if the due date is before the date on which the order comes into force.
(9)In this paragraph and paragraph 6—
(a)“assets” has the meaning given in section 21(1) of TCGA 1992, but also includes sterling;
(b)“UK” means the United Kingdom, including the territorial sea of the United Kingdom.
Commencement Information
I2Sch. 25 para. 4 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
5(1)The Treasury may by regulations amend this Part of this Schedule so as to—U.K.
(a)add, amend or remove categories of information for the purposes of determining the amount of a penalty under paragraph 3;
(b)amend the relevant percentage specified in that paragraph for the withholding of information in any category.
(2)Regulations under this paragraph may include consequential provision, including provision amending, repealing or revoking any provision of an Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).
(3)In sub-paragraph (2) “subordinate legislation” has the same meaning as in the Interpretation Act 1978.
Commencement Information
I3Sch. 25 para. 5 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
6(1)This paragraph makes provision in relation to offshore transfers.U.K.
(2)Where the liability to tax which would have been shown in the return is a liability to income tax, the applicable condition is satisfied if the income on or by reference to which the tax is charged, or any part of the income—
(a)is received in a territory outside the UK, or
(b)is transferred before the relevant date to a territory outside the UK.
(3)Where the liability to tax which would have been shown in the return is a liability to capital gains tax, the applicable condition is satisfied if the proceeds of the disposal on or by reference to which the tax is charged, or any part of the proceeds—
(a)are received in a territory outside the UK, or
(b)are transferred before the relevant date to a territory outside the UK.
(4)In the case of a transfer falling within sub-paragraph (2)(b) or (3)(b), references to the income or proceeds transferred are to be read as including references to any assets derived from or representing the income or proceeds.
(5)In relation to an offshore transfer, the territory in question for the purposes of paragraph 4 is the highest category of territory by virtue of which the information involves an offshore transfer.
(6)“Relevant date” means the date on which the person becomes liable to a penalty under this Schedule.
Commencement Information
I4Sch. 25 para. 6 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
7(1)Paragraph 8 provides for reductions in the penalty under this Schedule where the person discloses information which has been withheld by a failure to make a return (“relevant information”).U.K.
(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.
(7)Paragraph 4(4) to (6) applies to determine whether relevant information involves an offshore matter, an offshore transfer or a domestic matter.
Commencement Information
I5Sch. 25 para. 7 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
8(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.U.K.
(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.
| Standard percentage | Minimum percentage for prompted disclosure | Minimum percentage for unprompted disclosure |
|---|---|---|
| 70% | 45% | 30% |
| 100% | 60% | 40% |
| 105% | 62.5% | 40% |
| 140% | 80% | 50% |
| 150% | 85% | 55% |
| 200% | 110% | 70% |
(3)But HMRC must not under this paragraph reduce a penalty below £300.
Commencement Information
I6Sch. 25 para. 8 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
9(1)If HMRC think it right because of special circumstances, they may reduce a penalty under this Schedule.U.K.
(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.
Commencement Information
I7Sch. 25 para. 9 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
10(1)This paragraph applies where—U.K.
(a)a person is liable to a penalty under this Schedule in respect of a failure, and
(b)the amount of the penalty is the amount in paragraph 3(3)(a) or 3(5)(a).
(2)The amount of that penalty is to be reduced by the amount of any other penalty incurred by the person, the amount of which is determined by reference to the same liability to tax.
(3)In sub-paragraph (2), the reference to “any other penalty” does not include—
(a)a penalty under Schedule 26 (penalties for failure to pay tax),
(b)a penalty under Schedule 56 to FA 2009 (penalty for late payment of tax), or
(c)a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc.).
Commencement Information
I8Sch. 25 para. 10 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
11(1)For the purposes of a penalty under this Schedule references to a liability to tax which would have been shown in a return are references to the amount which, if a complete and accurate return had been delivered on the due date, would have been shown to be due or payable by the taxpayer in respect of the tax concerned for the period to which the return relates.U.K.
(2)In the case of a penalty which is assessed at a time before the person makes the return to which the penalty relates, HMRC may either—
(a)proceed on the assumption that the amount in paragraph 3(3)(a) is less than the amount in paragraph 3(3)(b), or the amount in paragraph 3(5)(a) is less than the amount in paragraph 3(5)(b), or
(b)determine the amount mentioned in sub-paragraph (1) to the best of HMRC's information and belief.
(3)If the person subsequently makes a return, the penalty must be re-assessed by reference to the amount of tax shown to be due and payable in that return (but subject to any amendments or corrections to the return).
Commencement Information
I9Sch. 25 para. 11 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
12(1)Where a person is liable to a penalty under this Schedule HMRC may assess the penalty.U.K.
(2)Where HMRC assess a penalty they must—
(a)notify the person, and
(b)state in the notice the failure (or failures) for which the person is liable to a penalty.
(3)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.
(4)An assessment of a penalty under this Schedule—
(a)is to be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for in this Schedule),
(b)may be enforced as if it were an assessment to tax, and
(c)may be combined with an assessment to tax.
Commencement Information
I10Sch. 25 para. 12 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
13(1)A supplementary assessment may be made in respect of a penalty under this Schedule if an earlier assessment—U.K.
(a)is based on a liability to tax that would have been shown in a return, and that liability is found by HMRC to be an underestimate, or
(b)is based on a liability to tax that is found by HMRC to be insufficient.
(2)Sub-paragraph (3) applies if an assessment in respect of a penalty—
(a)is based on a liability to tax that would have been shown in a return, and that liability is found by HMRC to be an overestimate, or
(b)is based on a liability to tax that is found by HMRC to be excessive.
(3)HMRC may by notice to the person amend the assessment so that it is based upon the correct amount.
(4)An amendment under sub-paragraph (3)—
(a)does not affect when the penalty must be paid;
(b)may be made after the last day on which the assessment in question could have been made under paragraph 14.
Commencement Information
I11Sch. 25 para. 13 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)
14(1)An assessment of a penalty under this Schedule may not be made after the later of Date A and (where it applies) Date B.U.K.
(2)Date A is the end of the period of 2 years beginning with the due date.
(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 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.
(5)Sub-paragraph (1) does not apply to a re-assessment under paragraph 11(3).
(6)A re-assessment under that paragraph must be made before the end of the period of 2 years beginning with the day on which the return is made.
Commencement Information
I12Sch. 25 para. 14 in force at 6.4.2024 for specified purposes by S.I. 2024/440, reg. 2(1)