TC09585 - [2025] UKFTT 00867 (TC)

Fecha: 15-Jul-2025

The legislation

The legislation

117.

Under paragraph 1 of Schedule 41, a penalty is payable for a failure to notify chargeability to tax under section 7 of the TMA, unless the taxpayer can show that the failure was not deliberate and he or she has a reasonable excuse for the failure. The penalty is expressed as a percentage of the potential lost revenue and varies depending on whether:

(1)

the failure was “deliberate and concealed”, “deliberate but not concealed”, or neither deliberate nor concealed;

(2)

there has been disclosure by the taxpayer;

(3)

any such disclosure was prompted or unprompted and the quality of any such disclosure; and

(4)

the Respondents became aware of the failure less than 12 months after the time when the tax first becomes unpaid by reason of the failure.

118.

The Respondents also have a discretion to reduce a penalty for “special circumstances”.

119.

More specifically, in the present circumstances:

(1)

paragraph 6(2)(b) of Schedule 41 provides that the standard penalty for a failure to notify which is deliberate but not concealed is 70% of the potential lost revenue;

(2)

paragraph 6(2)(c) of Schedule 41 provides that the standard penalty for a failure to notify which is not deliberate is 30% of the potential lost revenue;

(3)

paragraph 7 of Schedule 41 provides that the potential lost revenue is so much of the amount of CGT in respect of the relevant tax year as is, by reason of the failure to notify, unpaid on the 31 January following that tax year;

(4)

paragraphs 12 and 13 of Schedule 41 set out a regime for a reduction in the penalty depending on the timing and quality of disclosure. They provide that:

(a)

a person discloses a failure to notify by:

(i)

telling the Respondents about it (“Telling”);

(ii)

giving the Respondents reasonable help in quantifying the tax unpaid by reason of the failure (“Helping”); and

(iii)

allowing the Respondents access to records for the purpose of checking how much tax is unpaid (“Giving”);

(b)

a disclosure of a failure to notify is “unprompted” if it is made a time when the person making it has no reason to believe that the Respondents have discovered or are about to discover the relevant failure and, otherwise, is “prompted”;

(c)

in relation to disclosure, “quality” includes timing, nature and extent;

(d)

where a person who would otherwise be liable to a penalty at the standard percentage for a failure to notify has made a disclosure, the Respondents must reduce the penalty to one that reflects the quality of the disclosure provided that:

(i)

in the case of a prompted failure to notify which is deliberate and not concealed, the percentage cannot be reduced to less than 35%;

(ii)

in the case of an unprompted failure to notify which is deliberate and not concealed, the percentage cannot be reduced to less than 20%;

(iii)

in the case of a prompted failure to notify which is not deliberate, the percentage cannot be reduced to less than 10% of the potential lost revenue (in a case where the Respondents became aware of the failure less than 12 months after the time when the tax first becomes unpaid by reason of the failure) and, otherwise, 20% of the potential lost revenue; and

(iv)

in the case of an unprompted failure to notify which is not deliberate, the percentage cannot be reduced to less than 0% of the potential lost revenue (in a case where the Respondents became aware of the failure less than 12 months after the time when the tax first becomes unpaid by reason of the failure) and, otherwise, 10% of the potential lost revenue;

(5)

paragraph 14(1) of Schedule 41 provides that the Respondents have a general discretion to reduce the penalty if they think it right because of “special circumstances”;

(6)

paragraph 16(3) of Schedule 41 provides that a penalty assessment is to be treated for procedural purposes in the same way as an assessment to tax;

(7)

paragraph 19(2) of Schedule 41 provides that, on an appeal against a penalty to the FTT, the FTT may either affirm the Respondents’ decision or substitute for the Respondents’ decision another decision which the Respondents had the power to make;

(8)

paragraph 19(3) of Schedule 41 provides that, where the FTT substitutes for the Respondents’ decision another decision which the Respondents had the power to make, it may rely on paragraph 14 of Schedule 41 to the same extent as the Respondents or, if it thinks that the Respondents’ decision was flawed, to a different extent; and

(9)

paragraph 20 of Schedule 41 provides that no liability to a penalty arises in the case of a failure which is not deliberate if the taxpayer satisfies the Respondents (or, on an appeal to the FTT, the FTT) that he or she has a reasonable excuse for the failure.

120.

The above paragraphs describe the law in relation to the imposition of penalties which is applicable in the present case. However, in this case, it is also relevant to be aware that, although it is just a practice and does not have the force of law, the long–standing practice of the Respondents in reducing penalties for the quality of disclosure in any case is to:

(1)

calculate the difference between the maximum and minimum penalty in that case;

(2)

allocate up to 30% of that difference to each of “Telling” and “Giving” and up to 40% of that difference to “Helping”; and

(3)

reduce the penalty by deducting the amount so calculated from the maximum penalty.