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HMRC internal manual

Compliance Handbook

Penalties for failure to notify: how to process a penalty: when you must tell the person of the penalty

Normally you should issue the penalty assessment to the person when the failure that gave rise to the penalty is put right. But that is not essential.

A penalty assessment may be made up to 12 months after

  • the end of the period during which the person can appeal against our assessment of the tax unpaid because of the failure, or
  • when the person has appealed against the assessment, the time when the appeal is finally decided or the person withdraws it, or
  • where there is no such assessment, the date on which the amount of tax unpaid because of the failure is ascertained, see note below.

Note: If, following a failure to notify, the person submits a tax return, you should ensure that, even if you open an enquiry, you make the penalty assessment within 12 months of the receipt of the return. The potential lost revenue will be the tax as shown by the person’s return. The conclusion about the correctness of the return may not occur until more than 12 months after this date, meaning that we would otherwise be out of time to raise the penalty assessment. A supplementary failure to notify penalty assessment can be made if the return is found to be insufficient (FA08/SCH4/para16(6)), see CH74250. Any understatement will also have to be considered for penalties under Sch 24 FA 07.

A contract settlement following a compliance check is equivalent to raising a penalty assessment. EM6000 onwards gives guidance on contract settlements.

FA08/SCH41/PARA16 (4) & (5)