INTM917440 - DRAFT The International Controlled Transaction Reporting Regulations: Regulations Part 5
This guidance is in draft. It covers the International Controlled Transaction Reporting Regulations 2026 (‘the Regulations’), which were laid before the House of Commons on 4 November 2026. HMRC aims to publish the ICTS notice on 26 November 2026 (when the Regulations come into force), and detailed guidance on the ICTS notice in this manual by 31 December 2026, prior to the reporting requirement coming into effect from 1 January 2027.
Introduction
Part 5 covers regulations 19 to 27 which detail the penalties that may be charged where requirements are not met (regulations 19 to 21 and 26), reasonable excuse (regulation 22), penalty assessments (regulation 23), appeals (regulations 24 and 25) and enforcement (regulation 27).
For the initial period of ICTS implementation, there is additional guidance at INTM917450
Much of part 5 relies on key concepts established in part 2 of the regulations. In particular, the date by which the information must be provided to HMRC (regulation 6), the form and manner in which the information is to be provided (regulation 7), and how accuracy is determined for the purposes of ICTS in relation to that information (regulation 9). It will be useful to reference the guidance on part 2 of the regulations (INTM917430) when considering a penalty position.
The penalty framework for the ICTS gives the liability to a penalty to the entity with the obligation to provide specified information: the reporting entity as defined in regulations 16 and 17.
In the case of a partnership, where the penalty is a failure to provide specified information (regulations 19 and 20), the penalty is payable by all relevant partners and not just the representative partner. This does not apply to a penalty for inaccuracy, (regulation 21) where only the partner who submitted the ICTS is liable for the penalty.
For managing agents of Lloyd's syndicates, where there is a failure that applies to more than one corporate member of the syndicate, the managing agent will be liable to a penalty for each corporate member of the syndicate to which the failure relates. If a syndicate has several corporate members, some or all of whom are party to the transaction where there is a failure, the penalty will be multiplied by the number of corporate members party to the transaction.
Regulation 19: Penalties for failure to provide specified information
A reporting entity may be liable to a penalty where it does not meet any of the following reporting requirements:
a. Failure to submit an ICTS by the specified submission date (regulation 4(2))
b. Failure to provide the specified information in the correct form and manner (regulation 7)
c. Failure to follow a Commissioners’ direction, either in terms of specified information (regulation 8(1)) or in terms of form and manner (regulation 8(3))
d. Failure to amend the specified information where it is no longer accurate as defined by regulation 9 (regulation 10(2))
For any of these failures, the reporting entity or relevant partner is liable to a £300 penalty for each accounting period or underwriting year the failure occurs (regulation 19). As the failure to provide specified information includes failure to follow the required form and manner, cases where rounding or aggregation of transactions have not met the requirements of regulation 7 will be a failure to provide specified information.
Regulation 20: Daily default penalty
If a reporting entity continues to fail to provide specified information after a penalty notice has been issued under regulation 19, the reporting entity or relevant partner will be liable to an additional daily default penalty not exceeding £60 per day. Where the failure continues beyond 30 days after the regulation 19 penalty has been issued, HMRC can apply to a tribunal for that penalty to be increased (regulation 26).
Regulation 21: Penalties for inaccurate specified information
Where a reporting entity has failed to provide accurate specified information to HMRC, they will be liable to a penalty not exceeding £3,000 (regulation 21) where:
- Condition A: the inaccuracy is careless, as defined by s118(5) and (6) of the Taxes Management Act 1970 as a failure to take reasonable care, including the failure to take reasonable steps to inform HMRC where it is later discovered that information provided is inaccurate, or,
- Condition B: the reporting entity ought reasonably to have known that the information was inaccurate, either at the time it was submitted or subsequently, and failed to take reasonable steps to inform HMRC in a reasonable timeframe.
The reporting entity will also become liable to a penalty where:
- Condition C: the inaccuracy is deliberate as defined by section 118(7) of the Taxes Management Act 1970
Regulation 22: Matters to be disregarded in relation to liability to penalties
A reporting entity or relevant partner is not liable to penalties under regulations 19 and 20 where it satisfies an officer of HMRC that they have a reasonable excuse. HMRC's Compliance Handbook notes that whist there is no statutory meaning of reasonable excuse, its ordinary meaning should be used (CH160100). A reasonable excuse is one which stops a taxpayer (in this case reporting entity) from meeting an obligation despite reasonable care being taken. The reasonable excuse must exist on or before the obligation, and if the excuse ends the failure must be remedied without unreasonable delay (regulation 22(3)).
Reasonable excuse does not include an insufficiency of funds, or the reliance on another person to do something (regulation 22(2)). An inaccuracy penalty under regulation 21 will not be charged where the reporting entity can demonstrate that it took reasonable care (regulation 22(4))
Regulation 23: Assessment of penalties
All penalties to which a reporting entity or relevant partner may become liable, may be assessed by HMRC. Where a penalty is applied, the officer must notify the reporting entity or relevant partner of that assessment (regulation 23(2)).
For a failure to provide specified information HMRC can assess a penalty within the following timeframes, beginning with the date on which the reporting entity or relevant partner became liable to the penalty:
- Six years:
- Failure to provide the specified information by the specified submission date (regulation 4(2))
- Failure to provide the specified information in the form and manner specified in a notice (regulation 7)
- Failure to amend the specified information where it is no longer accurate as defined by regulation 9 (regulation 10(2))
- Twelve
months:
- Failure to comply with a commissioners’ direction, either failure to provide the information or records specified at regulation 8(1) or failure to provide this in the required form and manner specified at regulation 8(3)
For penalties relating to failures to accurately provide specified information, the assessment must be no later than:
- Six years beginning with the date the reporting entity or relevant partner became liable to the penalty, or if earlier
- Twelve months beginning with the date on which the inaccuracy came to the attention of an officer of Revenue and Customs.
Regulation 24: Right to appeal against penalty
A reporting entity or relevant partner who is charged a penalty may appeal against that penalty by notice, on two grounds (regulation 24):
- The liability to a penalty has not arisen
- The amount of the penalty
Regulation 25: Procedure on appeal against penalty
A reporting entity or relevant partner must notify HMRC of an appeal to a penalty (under regulation 24) in writing, stating the grounds of appeal, within 30 days of HMRC issuing the notification of a penalty under regulation 23(2).
For an appeal on the grounds that the liability has not arisen, the tribunal may confirm or cancel the assessment.
For an appeal regarding the amount of the penalty, the tribunal may confirm the assessment or substitute it with another assessment an officer of Revenue and Customs had the power to make.
Part 5 of the Taxes Management Act 1970 on appeals and other proceedings, applies to appeals notified under these regulations.
Regulation 26: Application for increased daily default penalty
Where a reporting entity or relevant partner has become liable to a daily default penalty under regulation 20, the penalty has been assessed under regulation 23, and the failure has continued for more than 30 days after the notice of penalty is issued, an officer of HMRC can appeal to the tribunal to assess an increased daily penalty.
The tribunal can determine that an increased daily penalty can be assessed and also determine the amount of the increase up to £1,000 per day. In that circumstance, HMRC must inform the reporting entity or relevant partner, both of the application to increase the amount, and any increased amount agreed by the tribunal, including the applicable date.
Regulation 27: Payment and enforcement of penalties
All penalties under these regulations must be paid within 30 days and are enforceable as if they were an assessment to corporation tax. The commencement of that 30-day period is either the date on which the penalty is notified is made by HMRC or, where there is an appeal, the date the appeal is finally determined or withdrawn.
For these regulations, ‘finally determined’ means when the appeal process has been completed, including referral to tribunal as applicable. Per these regulations, 'tribunal' means the First-tier Tribunal, or, where determined by or under Tribunal Procedural Rules, the Upper Tribunal.