MTT55460 - Administration: Compliance: Penalties: Penalties relating to record-keeping

The filing member has a duty to keep and preserve such records as may be needed to enable it to deliver correct and complete MTT returns (see MTT51500).

A penalty of £3000 may be charged for each accounting period in relation to which:

  • the filing member has failed to keep or to preserve adequate records for the required duration,
  • HMRC reasonably requires facts to be proved, which would have been proved by those records had the filing member upheld its obligations, and
  • those facts are not proved by other documentary evidence provided to HMRC.

This is set out in paragraph 46, schedule 14 to Finance (No.2) Act 2023.

Assessment and notification of penalty 

HMRC charge penalties relating to record-keeping by formal assessment. Where a penalty is assessed, HMRC will issue a penalty notice to the filing member stating:

  • the amount of the penalty,
  • the date of issue, and
  • the time during which an appeal can be made.

The assessment of a penalty is to be treated for procedural purposes in the same way as an assessment to tax. It may be enforced as if it were an assessment to tax and can be combined with an assessment to tax. See FA21/SCH14/PART11/PARA46.

Time limits

An assessment of a penalty relating to record keeping must be made before the end of the period of 12 months beginning with: 

  • the end of the appeal period for the assessment of the liability to tax which would have been shown in the return, or 
  • if there is no such assessment, the date on which that liability is ascertained, or it is ascertained that the liability is nil.

Appeal period

‘Appeal period’ refers to the period during which the filing member could either make an appeal, or has made a valid appeal that has not been determined or withdrawn. 

Liability and payment

A penalty relating to record-keeping is raised against the filing member and does not attract interest charges.

A penalty relating to record-keeping must be paid within 30 days of the day on which notification of the penalty is issued. 

Payments received by the filing member will be ignored for corporation tax purposes if:

  • the payment is received from a company (or companies) within the charge to corporation tax,
  • the payment is received as part of an agreement between the filing member and that company (or companies) to reimburse or indemnify the filing member in respect of a penalty relating to record-keeping, and
  • the payments do not, in total, exceed the amount of the penalty.

Appeal 

A filing member may appeal against a penalty. Once appealed against, the collection of a penalty is postponed. This means that no action can be taken to collect a penalty while it remains under appeal.

Reduction in special circumstances

HMRC has discretion to reduce a penalty because of special circumstances. The guidance on special reduction for all relevant taxes is in a separate chapter at CH170000.