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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: How the corporate tax regime works for CFCs: HMRC enquiries: penalties

For a return or other document which is due to be filed on or after 1 April 2009, relating to a tax period beginning on or after 1 April 2008, FA07/SCH24/PARA1 (penalties for errors) will apply to the CFC supplementary page as it applies to the rest of the return. This renders companies liable to a penalty where they deliver an incorrect return or, on discovering that a return is incorrect, do not remedy the error without reasonable delay. (Returns due to be filed before 1 April 2009 were governed by the previous penalty regime under FA98/SCH18/PARA20.)

The maximum penalty is calculated by applying an appropriate percentage to the potential lost revenue as a result of putting right an inaccuracy. Full details of these penalties are found in the Compliance Handbook.

The imposition of penalties is subject to the oversight of Business International Foreign Profits Team. Before a penalty is imposed under FA07/SCH24/PARA1 in respect of a CFC return the following will be taken fully into account:

  • the information that should reasonably have been available to the company making the return,
  • the understanding of the legislation that might reasonably be expected and
  • the company’s justification for taking an alternative interpretation of facts or legislation.