Penalties for Failure to Notify: Calculating the penalty: Penalty reductions for quality of disclosure: Non-deliberate failure disclosed within 12 months
If the disclosure of a non-deliberate, CH72200, failure to notify, see CH71220, is made less than 12 months after the time when tax first becomes unpaid because of the failure, the penalty percentage can be reduced even further. The minimum penalty is nil where a disclosure is unprompted and non-deliberate.
Unless they are already registered, a person has an obligation to make and pay VAT returns on a calendar quarterly basis where they are required to be registered for VAT, that is, for quarters ending March, June, September, and December. For failure to notify penalty purposes, the time that tax first becomes unpaid is the day after the due date for what would have been the first calendar quarterly accounting period.
Virtually all VAT businesses must now submit online returns and pay any VAT due electronically. The deadline for submitting and paying online returns is one calendar month and 7 days and you must take this additional time into account when considering when tax first becomes unpaid.
Example where penalty rate is reduced to nil-unprompted, non-deliberate disclosure
For example: ‘A’ should have notified their liability to be registered for VAT by 30 September 2010 therefore their effective date of registration is 1 October 2010. However notification was not received until 1 November 2011. Payment for the first quarterly return for the period ending 31 December 2010 would have been due by 7 February 2011 consequently, the date from which the tax first became unpaid was 8 February 2011, i.e. the day after due date.
1 November falls within 12 months of 8 February 2011. Accordingly, the minimum percentage is 0%.
Example where penalty rate is 10%-unprompted, non-deliberate disclosure
‘B’ should have notified their liability to be registered for VAT by 30 May 2011 and has an effective date of registration 1 June 2011. However they failed to notify until 1 December 2012. This first quarterly return for the period ending June 2011 would have been due 7 August 2011 consequently, the date from which tax first became unpaid was 8 August 2011.
1 December 2012 is 16 months after 8 August 2011. Accordingly the penalty percentage is 10%.
Whether the disclosure is made within the 12 month time frame is a purely objective test.
CH73200 gives details of the maximum and minimum penalty percentages.
There is also a requirement to submit returns on a calendar quarterly basis where a person is registerable for other indirect taxes such as Insurance Premium Tax, Landfill Tax, Aggregates Levy and Climate Change Levy.
Please contact Tax Administration, Litigation and Advice (TALA) if there is in any doubt in your particular case about whether or not a disclosure has been made less than 12 months after the time when tax first became unpaid because of the failure.