IEIM750020 - Primary Penalty Regime

The legislation setting out the primary penalty regime is contained in regulation 13(1) – (5). These regulations provide that the default position for any such failure is a one-off penalty of no more than £5,000 (regulation 13(1)(a)(i)). Such a penalty of any amount up to £5,000 may be determined by HMRC. In deciding the amount of any penalty due under this regulation, an officer of HMRC should take into account all relevant facts. In particular, they should consider the reason for the failure, including whether there is any evidence that the failure was deliberate or due to the careless behaviour of the person, whether the person had previously failed to comply with obligations under these regulations, and what steps, if any, the person had taken to comply with the legislation.

The officer should also consider whether failure to report had significant consequences which could have reasonably been foreseen. For example, a lengthy failure to report an abusive tax avoidance scheme, which meant that HMRC was unable to take appropriate compliance action, would be likely to receive a higher penalty than a short failure to report, which had no impact on HMRC’s ability to take compliance action.

HMRC may decide not to charge a penalty if it considers that it is not necessary and appropriate to do so in light of all the relevant facts.