IPTM9120 - Overseas insurers: reporting duties of tax representatives: penalties for failures to comply and audits

Penalties

The tax representative and the overseas insurer are jointly and severally liable for penalties if the tax representative fails to comply with the requirement to issue a chargeable event certificate or is negligent in issuing an incorrect certificate. The penalties are the same as those applying to a UK insurer that fails to comply fully with the requirements of ICTA88/S552.

The penalties that may be imposed are listed in TMA70/S98. There is a maximum initial penalty of £300 for a failure to deliver a certificate and a maximum continuing penalty of £60 per day for each day that the failure continues after the initial penalty has been imposed. There is a maximum penalty of £3,000 where the insurer has issued an incorrect certificate through negligence on its part.

Audits

HMRC has the power to audit a tax representative to ensure that the tax representative and the overseas insurer are administering the reporting regime fully and correctly. Although the tax representative is responsible for issuing correct chargeable event certificates to policyholders and HMRC, it is not required to maintain the underlying records. The overseas insurer would normally be responsible for that.

In the event of an audit, the tax representative is required to make available any books, documents, records and information that is needed in order for the auditors to check that the tax representative is carrying out its reporting duties properly. When setting the timetable for an examination of the records the auditor would take into consideration that they are likely to be maintained elsewhere and would need to be transferred or sent to the representative.

As part of the audit the tax representative would also have to make available all internal guidance notes of the overseas insurer relating to chargeable events for its systems, both computerised and manual.