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HMRC internal manual

Aggregates Levy Guidance

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HM Revenue & Customs
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Penalties: Civil penalties

Law

The law is contained in the Finance Act 2001, Schedules 4 to 7 (as amended), Finance Act 2007 Schedule 24 (as amended) and Finance Act 2008 Schedule 41. Schedule 6 to FA2001 paragraphs 1 to 6 inclusive deals with criminal offences and penalties; the following Schedules deal with the civil offences and penalties regime for the levy. The range of Civil Penalties is as follows:

For periods before 1 April 2010

Penalty FA2001 Schedule 4
   
Late/failure to register Paragraph 1
Failure to notify cessation Paragraph 3
Penalty FA2001 Schedule 5
For breach of Walking Possession Paragraph 15
Penalty FA2001 Schedule 6
Civil evasion Paragraph 7
Misdeclaration Paragraph 9
Incorrect evidence for tax claim Paragraph 9A
Penalty FA2001 Schedule 7
Failure to furnish information Paragraph 1
Failure to keep records Paragraph 2
Failure to produce records Paragraph 4
Penalty FA2001 Schedule 9
Failure to notify cessation - group treatment Paragraph 6
Penalty FA2001 Section
Failure to make returns or payment on time 25(3)
Failure to obtain the Commissioners approval to appoint a tax representative 33(3)
For breach of regulation 45(2)

For periods on or after 1 April 2010

Penalty FA2001 Schedule 4
   
Failure to notify cessation Paragraph 3
Penalty FA2001 Schedule 5
For breach of Walking Possession Paragraph 15
Penalty FA2001 Schedule 6
Civil evasion (except in cases of dishonesty) Paragraph 7
Incorrect evidence for tax claim Paragraph 9A
Penalty FA2008 Schedule 36 (as amended)
Failure to furnish information (under paragraph 1) Paragraphs 39 and 40
Failure to produce records (under paragraph 1) Paragraphs 39 and 40
Penalty FA2001 Schedule 7
Failure to keep records Paragraph 2
Penalty FA2001 Schedule 9
Failure to notify cessation - group treatment Paragraph 6
Penalty FA2001 Section
Failure to make returns or payment on time 25(3)
Failure to obtain the Commissioners approval to appoint a tax representative 33(3)
For breach of regulation 45(2)
Penalty FA2007 Schedule 24 (as amended)
Errors (Civil Evasion where conduct involves dishonesty relating to an inaccuracy in documentation or failure to notify HMRC of an under-declaration) Paragraphs 1 & 2
Penalty FA2008 Schedule 41
Failure to Notify Paragraph 1

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General

Civil penalties are a means of increasing business compliance. They allow officers to exercise a degree of discretion based on their likely effect on compliance as opposed to other action.

The objectives are to:

  • ensure that civil penalties are issued correctly, subject to the reasonable excuse provisions (see AGL8600), with due regard to the effect on compliance
  • ensure that discretion is exercised nationally at a broadly consistent level;
  • correctly account for civil penalties charged through the Central Collection Unit (CCU).

The effect on compliance - officer’s discretion

Civil penalties are a tool to improve compliance. They must not be imposed automatically every time there is a default without regard to the circumstances. Before you issue a penalty you should look at the circumstances of the case and whether the issue of a penalty would have a positive effect on compliance.

The compliance package

The imposition of civil penalties is just one compliance tool available for use. When considering whether to issue a penalty it is important to bear in mind that there are other compliance measures that may be applied as an alternative to the issue of a civil penalty, e.g.

  • a verbal warning;
  • a written warning;
  • withdrawal of non-standard accounting periods or;
  • provision of security for the levy as a condition of carrying out taxable activities.

The use of one of these measures may have a greater compliance effect. When considering which course of action to take, the prime consideration is the compliance effect of that action. No business should receive a penalty without receiving written warning of the consequences of their continued non-compliance (except in cases of Belated Notification or Civil Evasion).

Record of decision making

If, after exercising discretion, you decide to issue a penalty you must record the factors you have taken into account, including the effect on compliance. All penalties are appealable to an independent tax tribunal and, although tribunals may only set aside a penalty on the grounds of reasonable excuse, they may criticise the Department if we are seen to issue penalties where the effect on compliance has not been considered.

The penalty form

Penalties must be notified to the business on Form AL40 (Assessment of Civil Penalty).

Original: Filled in by the officer who raises the penalty. After checking by another officer, this copy goes to the business. The reverse of the form lists the meanings of the various penalty codes and rates used on the front of the form.

CCU: Sent to the CCU by the officer who raises the penalty.

Local: This is the local file copy.

Remittance slip: Sent with the original to the business.

Exception: Misdeclaration by an unregistered entity, in which case use an EX601 and AL99 form and follow the guidance in section AGL8300.