EM4555 - Penalties: Failure to Notify Chargeability: All Years
Form of Notification
The notification should be in writing.
When Offence Committed
The offence is committed on the day following the expiry of the 6 month period.
Common Failure Situations
The most common situations in which liability to penalties is incurred are where
- a person commences trading without telling us
- a trust is created and the trustees do not tell us
- a chargeable gain arises in a year for which no return is issued (typically in a PAYE case)
- chargeability to CGT is not notified by the trustees in a case where the income has been returned personally by, for example, a life tenant.
Where returns are received in a case where penalties have been incurred, these should be examined critically and subjected to risk assessment. You should be alert to the possibility that the failure might have been just the first stage of evasion and it might well be a pointer to that taxpayer's attitude generally towards compliance.
No Liability Cases
Whatever the strict legal position, it has not been our practice, to charge a penalty where there is no net liability to tax or NIC. The most common example is the uncertificated subcontractor whose liability is wholly covered by the deductions made during the course of the year.
Multiple Years Cases
However, a tax-geared penalty should be sought for any year of assessment or accounting period where there has been failure to notify chargeability and additional liability arises for that year or periods. This applies even though for other `failure' years or periods there might be no net liability or there are repayments due to the taxpayer.