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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Debt and return pursuit: miscellaneous charges: Schedule 36 FA 2008 penalties

Penalties for failure to comply with information and inspection notices

New powers allow us to request information and documents from the employer. Paragraph 39 of Schedule 36 to the Finance Act 2008 enables DMB and HMRC to raise penalties if the information is not provided.

It is expected that the majority of employers will co-operate fully when asked for information and documents to allow quantification to take place. It is not intended that penalties for failure to provide information should be applied for, apart from in exceptional circumstances, as this may detract from our ability to quantify the employers’ liability.

Amount of penalty

A standard penalty of £300 may be raised where there has been a failure to provide the information or documents requested but not where there is a reasonable excuse for the failure. This can be followed 30 days after by daily penalties for continued failure although we would not assess daily penalties for these cases.

Review

In the rare cases where penalties are considered appropriate within DMB cases, they should be reviewed by an Officer grade or above.

The officer should review the case to consider the most effective way to:

  • establish the debt
  • obtain payment.

Only where there is no other recovery alternative should a standard penalty charge be authorised.

Warning Letter

When the authorising officer agrees that a standard penalty charge is appropriate, you should:

  • write to the taxpayer who has failed to comply with the information notice
  • warn them that you will charge a penalty of £300 if they do not comply with the notice within 14 days
  • make it clear that you still require the employer to comply with the notice.

If you receive no response to the warning letter after 14 days you should considered charging a penalty.

Reasonable excuse

No penalty will be raised if there is a reasonable excuse for not complying with an Information Notice or obstructing an inspection. This depends on a response being received or an inspection taking place as soon as is possible after the event. Schedule 36 part 745(1) refers.

There is no statutory definition of reasonable excuse. It is normally an unusual event that could not be reasonably foreseen or is beyond the person’s control and is connected with the notice or the obstruction. Some examples of what could be a reasonable excuse are:

  • a loss of records through fire, flood or theft
  • serious illness
  • bereavement
  • a computer breakdown
  • a loss of key personnel
  • unavoidable delays beyond the person’s control.

Assessing penalties

In cases where the taxpayer does not respond to the warning letter a penalty may be raised under Schedule 36 Part 7 46(1). All penalties must be authorised and signed by a higher debt manager or above. Use the penalty assessment notice IT07 (available on SEES) and include:

  • the date of the assessment
  • what led to the penalty (for example, failure to comply with the information notice dated DD/MM/YYYY)
  • the legislation under which the penalty is due
  • the amount of the penalty.

The notice should also explain the recipient’s appeal rights and the appeal process. It should explain that the penalty must be paid within 30 days of the date the notice was issued. When you assess the penalty, you should send the person:

  • the notice of assessment (with a copy to the agent if there is one)
  • a payslip (use the Print Payslip (PP) facility as described at DMBM115030
  • a covering letter to the person referring to your previous correspondence.

Normally, you should issue the penalty assessment to the person as soon as possible after the date specified on the information notice for producing the documents or providing the information has passed and the information or documents have not been supplied.

Note: Under Schedule 36 Part 7 46(2) a penalty assessment for standard penalties cannot be made more than 12 months after the relevant date which is the date on which the person became liable to the penalty.

IDMS and SAFE process for Schedule 36 penalties

Until enhancements are made to distinguish the new Schedule 36 penalties, you should raise these under the 394 penalty type in accordance with the guidance on creating charges on the SAFE Work Instruction pages DMB Module 3.

As the 394 penalty charge type is used for a multitude of miscellaneous penalties you should insert an ‘S36’ entry in the Local Reference field when creating the charge. This field is visible later to anyone viewing the charge on SAFE and will distinguish Schedule 36 penalties. Local Compliance will also raise penalties for failure to respond to Schedule 36 information notices under the 394 penalty type.

All penalties will be accounted for on SAFE and SAFE will pass the penalty to IDMS for pursuit by following the existing process for 394 penalties.

Penalty charges sent from SAFE to IDMS will appear on the Caseworker miscellaneous worklist. This will result in new taxpayer records being created for all new case even if the taxpayer UTR already exists.

Cases received will need to be worked clerically as the penalty debt cannot be included on any IDMS forms or be able to be linked to other charges.

Enforcement of Schedule 36 penalties

Schedule 36 penalties can be enforced by any of the usual methods, as described in this manual DMBM. Where it is necessary to take Schedule 36 penalties for enforcement action the particulars of claim and certificates of debt can be found in the DMB Guidance Gateway.