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HMRC internal manual

Fraud Civil Investigation Manual

Where CDF offer is made up to 29 June 2014: penalties and settlement of cases: New Penalties and Old Penalties

Schedule 24 FA 2007 introduced a new system of penalties on inaccurate returns, applying across direct and indirect taxes. Similar penalty rules were introduced for failures to notify and for certain VAT and Excise wrongdoing (Schedule 41 FA 2008) and for late returns (Sch55 2009). Collectively, these are known as ‘New Penalties’. Full instructions can be found in CH80000.

New Penalties only apply to periods after their introduction: they do not apply retrospectively. Thus for example Schedule 24 penalties for inaccurate returns apply to periods beginning on or after 1 April 2008, where the return is due on or after 1 April 2009. (This is the rule for IT, CT, CGT and VAT. Other duties are affected later.) Returns for earlier periods remain subject to the earlier penalty regimes (‘Old Penalties’).

During the early years of the New Penalties regime, Old Penalties will continue to be common. As Old Penalties will continue to be used for as long as relevant periods are assessable (that is, up to 20 years after the year of error. Old Penalties, which are based on different criteria and levels of mitigation/reduction, will continue to be imposed. The different bases used to calculate penalty loadings can result in different net penalties being imposed for direct and indirect tax evasion - even if predicated on the same behaviour.

Where New Penalties are also imposed for the later periods of a case, there could be three different levels of penalty for the same behaviour in different periods.

Guidance on Old Penalties may be found for direct taxes and indirect taxes within CC/factsheet 7a (CH202235), in the Code of Practice 9, SIOG9200 and EM4500.