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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Contract Settlements: Penalties: Abatement - Failure to Notify Chargeability

The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.

This guidance does not apply where the failure to notify occurs on or after 1 April 2010. Refer to the guidance at CH70000+ for details of the penalty that applies to those failures.

In cases where there has been a failure to notify chargeability, you will normally give the full 20 percent for disclosure and sometimes the additional 10 percent EM6071.

For example a person who failed to notify his chargeability need only admit that

  • he had been in business or in receipt of income from a particular date, and
  • he did not advise HMRC that he was liable.

Provided the information he gives is accurate (including for example, the date of commencement) he may, unless there are unusual features, qualify for a high abatement, for disclosure.

The abatement for co-operation EM6075 will depend on the facts of each case. It is not uncommon for the maximum abatement to be given.

The abatement for seriousness EM6080 is less straightforward. You should take into account the length of the delay after the statutory date for notifying the chargeability. Short delays would qualify for a higher abatement.

Bear in mind that separate abatement calculations should be made for other offences such as incorrect returns which are included in the same offer EM6062. If the other penalty is for an inaccuracy in a return or other document

  • with a filing date on or after 1 April 2009 and which
  • relates to a tax period beginning on or after 1 April 2008

you must refer to CH82000+ for guidance on how to work out that penalty.

FA98/Sch18/Para 2