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HMRC internal manual

Insurance Premium Tax

Procedures: belated notification or failure to notify penalties

Before 1 April 2010

All penalty decisions are delegated to local offices.

LIPTOs should:

  • establish that there is a liability to a penalty, which will include consideration of reasonable excuse; then
  • consider whether or not the penalty should be issued. For instance, you may wish to consider whether or not the issue of the penalty will ensure future compliance. As an example, if the trader is already deregisterable, then it is unlikely that the penalty will achieve its objective as a deterrent to non-compliance.

LIPTOs should feel free to exercise their discretion in a way that they feel is appropriate to the case and, providing that they can show that consideration has been given to this issue, no criticism can be attached to them.

For belated notification penalties (BNPs), LIPTOs should obtain all the facts and consider reasonable excuse in every case.

The following are unlikely to establish a reasonable excuse on their own, but a combination of these circumstances in any individual case may be considered as a reasonable excuse:

  • ignorance of basic law;
  • oversight;
  • misunderstanding;
  • a claim of earlier notification with no evidence of attempt to pursue it further;
  • no loss of tax;
  • no intent to evade;
  • the severity of the penalty.

Belated notification means that an insurer has failed to notify his liability to register at the proper time.

The insurer should be registered from the correct date. Form IPT 1 should be completed by the insurer or, if the Belated Notification is discovered after registration has been effected, existing registration details amended, see IPT10225.

The arrears of tax should be calculated as precisely as possible based on the information available.

The insurer may need to be visited or the payment of any arrears monitored (this will be a local decision).

If a BNP is appropriate, this should be calculated as the greater of 5% of the tax due or £250.

If a LIPTO considers that a penalty is appropriate, they should advise BTOps in writing to impose it. The memo should include the period of belatedness (i.e. the date of the correct EDR to the day before notification), the amount of the net arrears during this period, and the penalty amount.

If the IPT 1 is received:

  • direct at BTOps - the insurer will be registered from the date indicated, but the LIPTO will be contacted in order that a penalty can be considered;
  • locally - a decision on the penalty may be made prior to registration. In this case, a penalty notice can be issued with the registration certificate. The processing of an IPT 1 should never be delayed for penalty action to be considered.

Either way, penalty notices will be issued from BTOps.

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From 1 April 2010

HMRC has introduced a new system of penalties form the 1 April 2010. The penalty for belated notification to register is now described as failure to notify, and further details can be found in the Compliance Handbook at CH70000.