CH185070 - Dishonest tax agents: how to process a penalty: time limits for assessing penalties - examples

The time limit for issuing an assessment for a penalty depends on which penalty is being assessed.

Example 1 - initial and daily penalties for failing to comply with a file access notice
Example 2 - penalty for dishonest conduct

Example 1 - initial and daily penalties for failing to comply with a file access notice

We issued Mr Smith with a file access notice that required him to provide documents by 1 May 2015. Mr Smith did not comply with the file access notice and therefore became liable for an initial penalty on 2 May 2015.

The time limit for assessing the initial penalty is 2 May 2016, which is 12 months from when Mr Smith became liable to the initial penalty. Although Mr Smith became liable for the initial penalty on 2 May 2015, we would probably allow a period of grace before assessing it. We assessed an initial penalty on Mr Smith on 15 May 2015.

If Mr Smith still fails to comply with the file access notice we would consider charging daily penalties. Although we would allow a period of grace to see whether the initial penalty prompts compliance, daily penalties could be charged from 16 May 2015, being the day after the initial penalty. Even if we start charging daily penalties after 16 May 2015, we still only have 12 months from the first day after 15 May 2015 (the date on which he became liable to the penalty). So here the time limit for assessing daily penalties is 16 May 2016.

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Example 2 - penalty for dishonest conduct

Mrs Williams is a tax agent who we have determined has been involved in dishonest conduct. We issued Mrs Williams with a conduct notice on 12 August 2013. Mrs Williams appealed against the conduct notice and the tribunal confirmed our determination on 17 October 2013.

Mrs Williams’ dishonest conduct resulted in one of her clients understating its corporation tax liability by £25,000. The period for the client to appeal against this correction expired on 11 December 2013, and no appeal was received.

The time limit for assessing penalties for dishonest conduct, see CH185060, is within 12 months from the later of date one and date two.

Date one

Date one is the first day on which we may assess the penalty. This date is after a conduct notice has been issued where

  • the time allowed for giving notice of appeal against the determination has expired without notice of appeal being given, or
  • a notice of appeal against the determination was given within the time allowed, but the appeal has been withdrawn or the determination confirmed.

In this example date one is 17 October 2013.

Date two

Date two depends on whether a loss of tax revenue results from the dishonest conduct.

  • If a loss of tax revenue results from the dishonest conduct, date two is
  • the day after the end of the ‘appeal period’ for the assessment, or determination of the tax revenue lost, or if more than one client is involved, the end of the last such period, or
  • if there is no such assessment or determination, the day on which the amount of tax revenue lost is ascertained.
  • If no loss of tax revenue results from the dishonest conduct, then date two is the day on which we decide that no loss of tax revenue results.

In this example date two is 12 December 2013, being the day after the end of the appeal period.

Therefore, the time limit for assessing Mrs Williams with a penalty for dishonest conduct is 12 months from the later of date one and date two, which is 12 months from 12 December 2013.

FA12/SCH38/PARA30