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HMRC internal manual

Technical Teams Operational Guidance

Civil Investigation of Fraud (Code 9): historical record: 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 (Sch 55 2009). Collectively, these are known as ‘New Penalties’. Full instructions can be found in the Compliance Handbook.

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’).

Old Penalties will continue to be used for as long as relevant periods are assessed and settled, ie until at least 2030 in some cases. In the early years of the New Penalties regime, Old Penalties will continue to be common.

Old Penalties will continue to be imposed under the two former departments’ different criteria and levels of reduction. This 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 within leaflet IR160 [former IR73], Code of Practice 9 and for indirect taxes within Version 5 of the New Approach Guidance Notes.

SI Guidance also contains material on both Old and New Penalties.