UTT17150 - Penalties: Exercise of Discretion

Uncertain tax treatment (UTT) penalties are intended to deter non-compliance with UTT legislation. Businesses are liable to penalties when notification is late, incomplete, inaccurate, or not submitted when one is required.

Under paragraphs 20 and 21 of Schedule 17 to the Finance Act 2022 a company or partnership (as appropriate) is liable to a penalty if they fail to comply with their obligation to give notification to HMRC (in accordance with paragraph 8) by the relevant deadline.

Under Paragraph 23(1)(a), HMRC may then decide whether or not to assess that penalty (HMRC ‘may assess the penalty’).

Because Parliament has determined that companies or partnerships will be liable to these penalties, HMRC operates under the strong presumption that they will ordinarily be assessed.

In particular cases where the circumstances merit it, HMRC may decide to exercise their discretion not to assess a penalty. This discretion is to be considered on case-by-case basis taking into account the individual facts and circumstances of the case and all relevant evidence available.

Examples of situations where HMRC may exercise its discretion not to charge include the following (please note that this is not an exhaustive list) and this is reflected in examples under UTT17350:

  • Where HMRC has declined to provide clearance on the basis that there is no uncertainty.
  • Where HMRC had not updated guidance to reflect HMRC’s interpretation of the law.
  • Where there is a doubt over whether the general exemption is met.

Exercising HMRC’s discretion to not charge a penalty does not disapply the requirement for a company or partnership to have a proper regard for providing accurate and timely notification of uncertain amounts.

Where we exercise discretion not to assess a penalty, compliance activity may still be undertaken by HMRC in relation to uncertain amounts through customer relationship management in LB or enquiry caseworkers in MSB.

Whilst each case should be considered on its own individual facts and merit, where we have given advice to support future compliance and this advice has not been taken into account, if liability to a UTT penalty arises due to the same issue on which we gave advice, we would normally charge a penalty.