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HMRC internal manual

VAT Civil Penalties

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HM Revenue & Customs
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Insurance Premium Tax: Calculation and notification of a penalty: Failure to notify cessation of trading, provide information or produce records

Please note: penalties under Schedule 7 Finance Act 1994 for failure to notify liability to register have been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008.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note: penalties under the Finance Act 1994 for failure to provide information and failure to produce records have now been replaced by penalties under Schedule 36 Finance Act 2008 where HMRC have requested information or documents on or after 01 /04/2010.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.

Failure to notify cessation of trading

A registered insurer must notify HMRC within 30 days of the date on which they cease to have the intention of receiving amounts which are subject to IPT. If they fail to do so, they may be liable to a penalty.

Failure to provide information

Anyone involved in a taxable insurance contract or in the making of arrangements for a taxable insurance contract must if required by HMRC, provide us with any information relating to those contracts. Failure to do so may make that person liable to a penalty.

Failure to produce records 

Every person who is concerned in a taxable business must upon demand by HMRC, produce for inspection any documents relating to taxable insurance contracts entered into in the course of business. Failure to comply with the requirements of the demand may make that person liable to a penalty. Further guidance on the rules governing issue of Notice of Demand can be found in V2-1 Insurance Premium Tax.

Level of penalty

The penalty is a flat rate of £250.

Issuing a penalty

Before issuing a penalty consider

  • the use of discretion, see VCP11631, and
  • any reasonable excuse, see VCP11632 

You will need to confirm that any warning letter or demand that was required has been issued, and that any time allowed to comply with the requirement notified in the letter or demand has elapsed before a penalty is imposed.

If a penalty is appropriate and the person is registered for IPT you will need to complete Form IPT40 form using the appropriate penalty code. Send it to the VAT Central Unit (VCU). They will then issue a penalty assessment letter direct to the trader.

If a penalty is appropriate and the person is not registered for IPT you will need to assess the penalty by letter. You will need 4 copies of the letter

  • 2 copies to be sent to the trader together with a reply paid envelope addressed to the Birmingham Tax Accounting Centre. One copy of the letter should be headed “Remittance Advice” in red.
  • 1 copy to be forwarded to the Birmingham Tax Accounting Centre, and
  • 1 copy to be retained in the local records.