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HMRC internal manual

VAT Civil Penalties

Insurance Premium Tax: Calculation and notification of a penalty: Failure to nominate a Tax Representative

Please note: penalties under Schedule 7 Finance Act 1994 for failure to notify liability to register have been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008.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note: penalties under the Finance Act 1994 for failure to provide information and failure to produce records have now been replaced by penalties under Schedule 36 Finance Act 2008 where HMRC have requested information or documents on or after 01 /04/2010.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

If an insurer is either registered or liable to be registered but does not have a business or other fixed establishment within the UK, they must appoint a tax representative.

If they already have a representative fulfilling the requirements of the Insurance Companies Act 1982, Section 10, that person will normally be approved by HMRC to act as their tax representative.

Otherwise they will need to nominate a particular person and ask HMRC to approve that person as their tax representative. Failure to do so within 30 days may make the insurer liable to a penalty.

Where we believe that the revenue would not be sufficiently protected if a tax representative either continues to act or is nominated to act, whether they fulfil the requirements of the Insurance Companies Act, section 10 or not, we may ask the insurer to take action to appoint a tax representative who does have our approval. If they do not nominate a person within 30 days they may themselves become liable to a penalty.

If either the insurer or the existing approved tax representative withdraw from their agreement the insurer must take action to appoint a new tax representative who has HMRC approval within 30 days of the date that the former tax representative ceased to act in that capacity. Failure to do so may make the insurer liable to a penalty.

Level of penalty

The penalty amount for failure to comply is £10,000.

Issuing a penalty

If HMRC become aware that the insurer is not complying with the requirements relating to tax representatives, a warning letter should be sent before penalty action is considered. The letter should point out that continued failure to comply may result in a penalty of £10,000 being issued.

If the insurer does not comply within the time limit stated in the warning letter, you should consider whether the insurer has a reasonable excuse, see VCP11632, for their failure, or whether there are any other reasons why a penalty should not be imposed before you commence penalty action.

If you are satisfied that a penalty should be imposed you should complete Form IPT40 using Penalty Code 08 and send it to the VAT Central Unit (VCU) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) . The computer will then automatically send a penalty assessment letter to the trader.