Penalties and interest: supplying incorrect information
Where a person fraudulently or negligently gives incorrect information or evidence in response to a request under Section 14, 15, 16, 18 or 19, then Section 31(1)(b) provides that a penalty is due. The maximum penalty is £3,000. These penalties can be imposed on customer or third parties.
Most incorrect information from customer will be in the form of the claim form, the end of year declaration or an incorrect notification of change of circumstances but there will be occasions when someone supplies incorrect information. For example, in a suspected undeclared partner examination you ask Nikki, the customer, for the private address of her suspected partner. Nikki advises you that he lives at 6 Dorchester Square, but you later establish that he has never lived at that address. Nikki has therefore supplied incorrect information and you could charge a penalty under Section 31(1)(b).
As long as there has been fraud or neglect the legislation allows us to impose a penalty purely because information is incorrect. It does not have to be linked to an over-claim for tax credits. Although the legislation allows you to charge the penalty in this way you will normally seek your penalty under Section 31(1)(a) for an incorrect claim or end of year declaration or incorrect notification of a change of circumstances.
However, there might be occasions when Section 31(1)(a) will not cover the offence. For example the claim form turns out to be correct but during the course of your enquiry the customer(s) produces some evidence which you establish to be incorrect. If they acted fraudulently or negligently you could charge a penalty under Section 31(1)(b) as a punishment and as a deterrent to stop customers deliberately supplying false information to hinder our examinations and enquiries. Another example would be where a third party supplied the incorrect information. They would not be subject to a Section 31(1)(a) penalty so the use of Section 31(1)(b) would be your only means of penalising them.