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HMRC internal manual

Debt Management and Banking Manual

Pre-enforcement: Fast Track recovery action for important and significant cases: what are classed as important charges

Examples will include where:

  • daily penalties have been issued as a result of a customer’s continuing failure to comply with an information notice
  • during the course of an enquiry, the Compliance caseworker raises an assessment because he or she believes that the amount of tax returned is insufficient, and there is likely to be a loss of tax if this assessment is not pursued immediately. Examples of this may include cases where the compliance caseworker discovers or suspects that the taxpayer intends to avoid payment of tax by:

    • becoming non-resident
    • disposing of assets. For individuals this might involve transferring assets to family members so they are protected in the event of bankruptcy proceedings.
    • phoenixism - company being placed into liquidation with the intention of setting up a new company to carry on the same activity, having transferred the original companies assets, prior to its liquidation, to that new company.

Significance of low value debts

Many of the debts referred in this process will be low value, particularly penalties. Although they are low in relative value, these penalties are a key tool in driving up compliance.

Penalties may arise, amongst other things, for failure to comply with an HMRC information notice. There are three types:

  • an initial penalty of £300
  • a daily penalty of up to £60 a day for every day after the date the initial penalty is assessed until the information or documents are provided or
  • a tax-geared penalty.

Daily or tax-geared penalties cannot be charged unless an initial £300 penalty in respect of the failure, obstruction or concealment has been assessed and charged. Time to comply with the original notice, pay the £300 penalty and produce the information required is built into the process, which means that relatively few daily or tax-geared penalties are actually issued. However, it is essential that we pursue them in order to create a level playing field for our customers and clearly indicate to those who choose not to comply that their behaviour is unacceptable.