Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 3 — Power to obtain tax agent’s files etc
643

Scotland) to confidentiality of communications between client and
professional legal adviser, could be maintained in legal proceedings.
      (3)
Regulations under paragraph 23 of Schedule 36 to FA 2008 (information
powers: privileged communications) apply (with any necessary
modifications) to disputes under this paragraph as to whether a document
5
is privileged.
Power to copy documents
18
If a document is provided pursuant to a file access notice, an officer of
Revenue and Customs may take copies of or make extracts from the
document.
10
Power to retain documents
19    (1)
If a document is provided pursuant to a file access notice, HMRC may retain
the document for a reasonable period if an officer of Revenue and Customs
thinks it necessary to do so.
      (2)
While a document is retained—
15
(a)
the document-holder may, if the document is reasonably required
for any purpose, request a copy of it, and
(b)
an officer of Revenue and Customs must comply with such a request
without charge.
      (3)
The retention of a document under this paragraph is not to be regarded as
20
breaking any lien claimed on the document.
      (4)
If a document retained under this paragraph is lost or damaged, the
Commissioners are liable to compensate the owner of the document for any
expenses reasonably incurred in replacing or repairing the document.
Appeal against file access notice
25
20    (1)
If the document-holder is a person other than the tax agent, the document-
holder may appeal against the file access notice, or any requirement in it, on
the ground that it would be unduly onerous to comply with the notice or
requirement.
      (2)
Notice of appeal must be given—
30
(a)
in writing to the officer by whom the file access notice was given, and
(b)
within the period of 30 days beginning with the day on which the file
access notice was given.
      (3)
It must state the grounds of appeal.
      (4)
On an appeal that is notified to the tribunal, the tribunal may confirm, vary
35
or set aside the file access notice or a requirement in it.
      (5)
If the tribunal confirms or varies the notice or a requirement in it, the
document-holder must comply with the notice or requirement—
(a)
within such period as is specified by the tribunal, or
(b)
if the tribunal does not specify a period, within such period as is
40
reasonably specified in writing by an officer of Revenue and
Customs following the tribunal’s decision.

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 3 — Power to obtain tax agent’s files etc
644

      (6)
A decision by the tribunal under this paragraph is final (despite the
provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement
Act 2007).
      (7)
Subject to this paragraph, the provisions of Part 5 of TMA 1970 relating to
appeals have effect in relation to an appeal under this paragraph as they
5
have effect in relation to an appeal against an assessment to income tax.
Offence of concealment etc in connection with file access notice
21    (1)
A person (“P”) commits an offence if P—
(a)
conceals, destroys or otherwise disposes of a required document, or
(b)
arranges for the concealment, destruction or disposal of a required
10
document.
      (2)
A “required document” is a document within sub-paragraph (3) or sub-
paragraph (4).
      (3)
A document is within this sub-paragraph if at the time when P acts—
(a)
P is required to provide the document by a file access notice, and
15
(b)
either—
(i)
the notice has not been complied with, or
(ii)
it has been complied with, but P has been notified in writing
by an officer of Revenue and Customs that P must continue
to preserve the document (and the notification has not been
20
withdrawn).
      (4)
A document is within this sub-paragraph if at the time when P acts—
(a)
P is not required to provide the document by a file access notice,
(b)
P has been informed by an officer of Revenue and Customs that P
will be or is likely to be so required, and
25
(c)
no more than 6 months have elapsed since P was, or was last, so
informed.
      (5)
A person guilty of an offence under this paragraph is liable—
(a)
on summary conviction, to a fine not exceeding the statutory
maximum, and
30
(b)
on conviction on indictment, to imprisonment for a term not
exceeding 2 years or to a fine, or both.
Penalty for failure to comply
22    (1)
A person who fails to comply with a file access notice is liable to a penalty of
£300.
35
      (2)
Failing to comply with a file access notice also includes—
(a)
concealing, destroying or otherwise disposing of a required
document, or
(b)
arranging for any such concealment, destruction or disposal.
      (3)
“Required document” has the same meaning as in paragraph 21.
40

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 4 — Sanctions for dishonest conduct
645

Daily penalty for failure to comply
23
If the failure continues after notification of a penalty under paragraph 22 has
been issued, the person is liable to a further penalty, for each subsequent day
on which the failure continues, of an amount not exceeding £60 for each such
day.
5
Failure to comply with time limit
24
A failure to do anything required to be done within a limited period of time
does not give rise to liability to a penalty under paragraph 22 or 23 if the
thing was done within such further time (if any) as an officer of Revenue and
Customs may have allowed.
10
Reasonable excuse
25    (1)
Liability to a penalty under paragraph 22 or 23 does not arise if the person
satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that
there is a reasonable excuse for the failure.
      (2)
For the purposes of this paragraph—
15
(a)
an insufficiency of funds is not a reasonable excuse unless
attributable to events outside the person’s control,
(b)
if the person relies on another person to do anything, that is not a
reasonable excuse unless the first person took reasonable care to
avoid the failure,
20
(c)
if the person had a reasonable excuse for the failure but the excuse
has ceased, the person is to be treated as having continued to have
the excuse if the failure is remedied without unreasonable delay after
the excuse ceased.
Part 4
25
Sanctions for dishonest conduct
Penalty for dishonest conduct
26    (1)
An individual who engages in dishonest conduct is liable to a penalty.
      (2)
Subject to paragraph 27, the penalty to which the individual is liable is to
be—
30
(a)
no less than £5,000, and
(b)
no more than £50,000.
      (3)
In assessing the amount of the penalty, regard must be had to—
(a)
whether the individual disclosed the dishonest conduct,
(b)
whether that disclosure was prompted or unprompted,
35
(c)
the quality of that disclosure, and
(d)
the quality of the individual’s compliance with any file access notice
in connection with the dishonest conduct.
      (4)
An individual “discloses” dishonest conduct by—
(a)
telling HMRC about it,
40

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 4 — Sanctions for dishonest conduct
646

(b)
giving HMRC reasonable help in identifying the client or clients
concerned and in quantifying the loss of tax revenue (if any) brought
about by it, and
(c)
allowing HMRC access to records for the purpose of ensuring that
any such loss is recovered or otherwise properly accounted for.
5
      (5)
A disclosure is “unprompted” if it is made at a time when the individual has
no reason to believe that HMRC have discovered or are about to discover the
dishonest conduct.
      (6)
Otherwise, a disclosure is “prompted”.
      (7)
In relation to disclosure or compliance, “quality” includes timing, nature
10
and extent.
Special reduction
27    (1)
This paragraph applies if HMRC propose to assess an individual to a
penalty under paragraph 26 of £5,000.
      (2)
If they think it right because of special circumstances, HMRC may take one
15
or more of the following steps—
(a)
reduce the penalty to an amount below £5,000 (which may be nil),
(b)
stay the penalty, or
(c)
agree a compromise in relation to proceedings for the penalty.
      (3)
“Special circumstances” does not include—
20
(a)
ability to pay, or
(b)
the fact that a loss of tax revenue from a client is balanced by an over-
payment by another person (whether or not a client).
Power to publish details
28    (1)
The Commissioners may publish information about an individual if the
25
individual incurs a penalty under paragraph 26.
      (2)
The information that may be published is—
(a)
the individual’s name (including any trading name, previous name
or pseudonym),
(b)
the individual’s address,
30
(c)
the nature of any business carried on by the individual,
(d)
the amount of the penalty,
(e)
the periods or times to which the dishonest conduct relates,
(f)
any other information the Commissioners consider it appropriate to
publish in order to make clear the individual’s identity, and
35
(g)
the link (if there is one) between the dishonest conduct and any
inaccuracy, failure or action as a result of which information is
published under section 94 of FA 2009 (which relates to deliberate
tax defaulters).
      (3)
No information may be published under this paragraph if the penalty
40
incurred by the individual is £5,000 or less.
      (4)
Subsections (5) to (9) and (11) of section 94 of FA 2009 apply to publishing
information about an individual under this paragraph as they apply to
publishing information about a person under that section.

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 5 — Penalties: assessment etc
647

      (5)
If, in acting as a tax agent, the individual works or worked for an
organisation, sub-paragraph (2)(f) includes power to publish such
information about that organisation as the Commissioners consider
appropriate in order to make clear the individual’s identity.
      (6)
Before publishing information about the organisation, the Commissioners
5
must—
(a)
inform the organisation that they are considering doing so, and
(b)
afford the organisation reasonable opportunity to make
representations about whether it should be published.
Part 5
10
Penalties: assessment etc
Assessment of penalties
29    (1)
If a person becomes liable to a penalty under Part 3 or 4 of this Schedule,
HMRC may assess the penalty.
      (2)
But, in the case of a penalty under Part 4, they may only do so if a conduct
15
notice has been given to the person and either—
(a)
the time allowed for giving notice of appeal against the
determination has expired without notice of appeal being given, or
(b)
notice of appeal against the determination was given within the time
allowed, but the appeal has been withdrawn or the determination
20
confirmed.
      (3)
Paragraph 7(4) applies for the purposes of sub-paragraph (2)(b).
      (4)
If HMRC assess a penalty, they must notify the person.
30    (1)
HMRC may not assess a penalty under this Schedule after the applicable
deadline.
25
      (2)
For a penalty under Part 3, the applicable deadline is the end of the period
of 12 months beginning with the day on which the person became liable to
the penalty.
      (3)
For a penalty under Part 4, the applicable deadline is the end of the period
of 12 months beginning with the later of—
30
(a)
the first day on which HMRC may assess the penalty (see paragraph
29(2)), and
(b)
day X.
      (4)
If a loss of tax revenue is brought about by the dishonest conduct, day X is—
(a)
the day immediately following the end of the appeal period for the
35
assessment or determination of the tax revenue lost (or, if more than
one client is involved, the end of the last such period), or
(b)
if there is no such assessment or determination, the day on which the
amount of tax revenue lost is ascertained.
      (5)
Otherwise, day X is the day on which HMRC ascertain that no loss of tax
40
revenue has been brought about by the dishonest conduct.
      (6)
In sub-paragraph (4), “appeal period” means the period during which—
(a)
an appeal could be brought, or

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 5 — Penalties: assessment etc
648

(b)
an appeal that has been brought has not been withdrawn or
determined.
Appeal against penalty
31    (1)
A person may appeal against a decision of HMRC—
(a)
that a penalty is payable under Part 3 of this Schedule, or
5
(b)
as to the amount of a penalty payable under Part 3 or 4 of this
Schedule.
      (2)
Notice of appeal must be given—
(a)
in writing to HMRC, and
(b)
before the end of the period of 30 days beginning with the day on
10
which notification of the penalty was issued.
      (3)
It must state the grounds of appeal.
      (4)
On an appeal under sub-paragraph (1)(a) that is notified to the tribunal, the
tribunal may confirm or cancel the decision.
      (5)
On an appeal under sub-paragraph (1)(b) that is notified to the tribunal, the
15
tribunal may—
(a)
confirm the decision, or
(b)
substitute for the decision another decision that HMRC had power to
make.
      (6)
If, in the case of an appeal against a penalty under Part 4, the tribunal
20
substitutes its decision for HMRC’s, the tribunal may rely on paragraph 27
(special reduction)—
(a)
to the same extent as HMRC (which may mean applying the same
reduction as HMRC to a different starting point), or
(b)
to a different extent, but only if the tribunal thinks that HMRC’s
25
decision in respect of the application of that paragraph was flawed
(when considered in the light of the principles applicable in
proceedings for judicial review).
      (7)
Subject to this paragraph and paragraph 32, the provisions of Part 5 of TMA
1970 relating to appeals have effect in relation to an appeal under this
30
paragraph as they have effect in relation to an appeal against an assessment
to income tax.
Enforcement of penalty
32    (1)
A penalty under this Schedule must be paid—
(a)
before the end of the period of 30 days beginning with the day on
35
which notification of the penalty was issued, or
(b)
if a notice of appeal under paragraph 31 is given, before the end of
the period of 30 days beginning with the day on which the appeal is
withdrawn or determined.
      (2)
A penalty under this Schedule may be enforced as if it were income tax
40
charged in an assessment and due and payable.

Finance Bill
Schedule 37 — Tax agents: dishonest conduct
Part 6 — Miscellaneous provision and interpretation
649

Double jeopardy
33
A person is not liable to a penalty under this Schedule in respect of anything
in respect of which the person has been convicted of an offence.
34    (1)
A person is not liable to a penalty under this Schedule in respect of anything
in respect of which the person is personally liable to a penalty under—
5
(a)
Schedule 24 to FA 2007 (penalties for errors),
(b)
Schedule 41 to FA 2008 (penalties for failure to notify etc), or
(c)
Schedule 55 to FA 2009 (penalties for failure to make a return etc).
      (2)
Sub-paragraph (1) applies where, for example, the person is personally
liable by virtue of section 48(3) of VATA 1994 (VAT representatives).
10
Power to change amount of penalties
35    (1)
If it appears to the Treasury that there has been a change in the value of
money since the last relevant day, they may by regulations substitute for the
sums for the time being specified in paragraphs 22(1), 23, 26(2), 27(1) and
(2)(a) and 28(3) such other sums as appear to them to be justified by the
15
change.
      (2)
“Relevant day”, in relation to a specified sum, means—
(a)
the day on which this Act is passed, and
(b)
each day on which the power conferred by sub-paragraph (1) has
been exercised in relation to that sum.
20
      (3)
Regulations under this paragraph do not apply to a failure or conduct that
began before the day on which they come into force.
      (4)
The power to make regulations under this paragraph is exercisable by
statutory instrument.
      (5)
A statutory instrument containing regulations under this paragraph is
25
subject to annulment in pursuance of a resolution of the House of Commons.
Part 6
Miscellaneous provision and interpretation
Application of provisions of TMA 1970
36
Subject to the provisions of this Schedule, the following provisions of TMA
30
1970 apply for the purposes of this Schedule as they apply for the purposes
of the Taxes Acts—
(a)
section 108 (responsibility of company officers),
(b)
section 114 (want of form), and
(c)
section 115 (delivery and service of documents).
35
Tax
37    (1)
“Tax” means—
(a)
income tax,
(b)
capital gains tax,
(c)
corporation tax,
40