ECSH82575 - Sanctions for non-compliance: financial penalties: definitions

An appropriate amount

‘Appropriate’ is defined at Regulation 76(8)(a) as ‘effective, proportionate and dissuasive’.

‘Effective’ means that the penalty should address the non-compliance and promote compliance.

‘Proportionate’ means that the sanction must be proportionate to the nature and severity of the contravention and the circumstances of the relevant person penalised.

‘Dissuasive’ means that the penalty should dissuade the relevant person as well as other supervised businesses from continuing their non-compliant behaviour. The penalty should signal to the supervised population as a whole that non-compliance is serious and will be treated as such.

These factors need to be balanced against the requirement that the penalty should reflect the circumstances of the person (P). The decision maker (DM) needs to consider the factors in Regulation 83 when deciding whether the penalty amount is appropriate.

Relevant requirement

The methodology prescribed by the Regulations for supervision requires businesses that we supervise to comply with what are described as relevant requirements which are set out in full in Schedule 6 of the Regulations.

Failure to comply with a relevant requirement can attract all the sanctions in the Regulations including a financial penalty. The decision as to what is the most appropriate penalty or penalties is to be decided on a case-by-case basis applying the relevant principles in the Regulations and operational guidance.

A person (P)

A financial penalty can be imposed on a person. A person means any person, including a body of persons corporate or unincorporate (that is, a natural person, a legal person and, for example, a partnership). Therefore, financial penalties can be imposed on individuals as well as businesses who have contravened a relevant requirement.

A financial penalty can also be imposed on an officer of P where HMRC can evidence that the officer was knowingly concerned in a contravention of a relevant requirement.

An officer of a person

This definition of officer is defined in regulation 3 as:

(a) in relation to a body corporate, means—

(i) a director, secretary, chief executive, member of the committee of management, or a person purporting to act in such a capacity, or

(ii) an individual who is a controller of the body, or a person purporting to act as a controller.

(b) in relation to an unincorporated association, means any officer of the association or any member of its governing body, or a person purporting to act in such a capacity

(c) in relation to a partnership, means a partner, and any manager, secretary or similar officer of the partnership, or a person purporting to act in such a capacity.