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HMRC internal manual

VAT Civil Penalties

Insurance Premium Tax: Calculation and notification of a penalty: Late notification and failure to notify liability to register

Please note: penalties under Schedule 7 Finance Act 1994 for failure to notify liability to register have been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008. The Failure to Notify penalty applies where an obligation to notify liability to register for IPT occurs on or after 01/04/2010. Penalties under Schedule 7 Finance Act 1994 will continue to apply where an obligation to notify occurs before 01/04/2010.

Please see the Compliance Handbook CH70000 for more information about the Failure to Notify penalty.

Please note: penalties under the Finance Act 1994 for failure to provide information and failure to produce records have now been replaced by penalties under Schedule 36 Finance Act 2008 where HMRC have requested information or documents on or after 01 /04/2010. If HMRC requested information or documents before 01/04/2010 the Finance Act 1994 penalties will continue to apply.

Please the Compliance Handbook CH20000 for more information about information and inspection powers.

The Finance Act 1994, sections 53 and 53AA, require an insurer or taxable intermediary to notify their liability to be registered within 30 days of the event giving rise to the liability.

If they fail to notify their liability to be registered or notify their liability late, they may be liable to a penalty.

The insurer or taxable intermediary should be registered from the correct date. They should complete Form IPT1 or if after registration it is discovered that they notified their liability to be registered late, the existing registration details must be amended. Further guidance on establishing the effective date of registration for IPT can be found in V2-1 Insurance Premium Tax.

If Form IPT1 is received

  • Direct in the VAT Central Unit (VCU), the insurer or taxable intermediary will be registered from the date indicated on the form, but the VCU will contact you so that you can consider whether or not a penalty should be issued.
  • By a local office they may make the decision whether or not to issue a penalty before registration. In this case, if a penalty is applicable it can be issued together with the registration certificate.

Note: Processing Form IPT1 should never be delayed for penalty action to be considered. Whatever the decision is, the Notice of assessment of civil penalty (IPT40) will be issued by the VCU.

Penalty Rate

The penalty is 5% of the tax assessed or if greater, £250.

Issuing a penalty

You should

  • Establish that there is a liability to a penalty, see VCP11612.
  • Consider whether or not the penalty should be issued, see VCP11630.

The arrears of tax should be calculated as precisely as possible based on the information available. The insurer or taxable intermediary may need to be visited or the payment of any arrears monitored (this will be a local decision).

If you consider that a penalty is appropriate, you should contact the VCU, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) in writing and ask them to issue it. The memo should include the period of lateness (the date of the correct EDR to the day before notification), the amount of the net arrears during this period, and the penalty amount.