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Finance (No. 2) BillPage 330

(2) After sub-paragraph (1) insert—

(1A) If the failure is in category 0, the penalty is—

(a) for a deliberate and concealed failure, 100% of the potential
lost revenue,

(b) 5for a deliberate but not concealed failure, 70% of the
potential lost revenue, and

(c) for any other case, 30% of the potential lost revenue.

(3) In sub-paragraph (2)—

(a) in paragraph (a), for “100%” substitute “125%”,

(b) 10in paragraph (b), for “70%” substitute “87.5%”, and

(c) in paragraph (c), for “30%” substitute “37.5%”.

(4) In sub-paragraph (5), for “3” substitute “4”.

11 (1) Paragraph 6A (categorisation of failures) is amended as follows.

(2) For sub-paragraph (1) substitute—

(A1) 15A failure is in category 0 if—

(a) it involves a domestic matter,

(b) it involves an offshore matter or an offshore transfer, the
territory in question is a category 0 territory and the tax at
stake is income tax or capital gains tax, or

(c) 20it involves an offshore matter and the tax at stake is a tax
other than income tax or capital gains tax.

(1) A failure is in category 1 if—

(a) it involves an offshore matter or an offshore transfer,

(b) the territory in question is a category 1 territory, and

(c) 25the tax at stake is income tax or capital gains tax.

(3) In sub-paragraph (2)(a), after “matter” insert “or an offshore transfer”.

(4) In sub-paragraph (3)(a), after “matter” insert “or an offshore transfer”.

(5) After sub-paragraph (4) insert—

(4A) A failure “involves an offshore transfer” if—

(a) 30it does not involve an offshore matter,

(b) it is deliberate (whether or not concealed) and results in a
potential loss of revenue,

(c) the tax at stake is income tax or capital gains tax, and

(d) the applicable condition in paragraph 6AA is satisfied.

(6) 35In sub-paragraph (5), for the words following “revenue” substitute “and
does not involve either an offshore matter or an offshore transfer”.

(7) In sub-paragraph (6)(a), after “matters” insert “or transfers”.

(8) Omit sub-paragraph (8).

(9) In sub-paragraph (9), after “paragraph” insert “and paragraph 6AA”.

12 40After paragraph 6A insert—

6AA (1) This paragraph makes provision in relation to offshore transfers.

Finance (No. 2) BillPage 331

(2) Where the tax at stake is income tax, the applicable condition is
satisfied if the income on or by reference to which the tax is
charged, or any part of the income—

(a) is received in a territory outside the UK, or

(b) 5is transferred before the calculation date to a territory
outside the UK.

(3) Where the tax at stake is capital gains tax, the applicable condition
is satisfied if the proceeds of the disposal on or by reference to
which the tax is charged, or any part of the proceeds—

(a) 10are received in a territory outside the UK, or

(b) are transferred before the calculation date to a territory
outside the UK.

(4) In the case of a transfer falling within sub-paragraph (2)(b) or
(3)(b), references to the income or proceeds transferred are to be
15read as including references to any assets derived from or
representing the income or proceeds.

(5) In relation to an offshore transfer, the territory in question for the
purposes of paragraph 6A is the highest category of territory by
virtue of which the failure involves an offshore transfer.

(6) 20In this paragraph “calculation date” means the date by reference
to which the potential lost revenue is to be calculated (see
paragraph 7).

6AB Regulations under paragraph 21B of Schedule 24 to FA 2007
(location of assets etc) apply for the purposes of paragraphs 6A
25and 6AA of this Schedule as they apply for the purposes of
paragraphs 4A and 4AA of that Schedule.

13 In paragraph 13 (standard percentage reductions for disclosure), in the Table
in sub-paragraph (3), at the appropriate places insert—

37.5% case A: 12.5% case A: 0%
case B: 25% 30case B: 12.5%”,
“87.5% 43.75% 25%”, and
“125% 62.5% 40%.

Penalties for failure to make returns etc

14 Schedule 55 to FA 2009 is amended as follows.

15 (1) 35Paragraph 6 (penalty for failure continuing 12 months after penalty date) is
amended as follows.

(2) In sub-paragraph (3A)—

Finance (No. 2) BillPage 332

(a) before paragraph (a) insert—

(za) for the withholding of category 0 information,
100%,, and

(b) in paragraph (a), for “100%” substitute “125%”.

(3) 5In sub-paragraph (4A)—

(a) before paragraph (a) insert—

(za) for the withholding of category 0 information,
70%,, and

(b) in paragraph (a), for “70%” substitute “87.5%”.

(4) 10In sub-paragraph (6), for “3” substitute “4”.

16 (1) Paragraph 6A (categorisation of information) is amended as follows.

(2) For sub-paragraph (1) substitute—

(A1) Information is category 0 information if—

(a) it involves a domestic matter,

(b) 15it involves an offshore matter or an offshore transfer, the
territory in question is a category 0 territory and it is
information which would enable or assist HMRC to assess
P’s liability to income tax, capital gains tax or inheritance
tax, or

(c) 20it involves an offshore matter and it is information which
would enable or assist HMRC to assess P’s liability to a tax
other than income tax, capital gains tax or inheritance tax.

(1) Information is category 1 information if—

(a) it involves an offshore matter or an offshore transfer,

(b) 25the territory in question is a category 1 territory, and

(c) it is information which would enable or assist HMRC to
assess P’s liability to income tax, capital gains tax or
inheritance tax.

(3) In sub-paragraph (2)—

(a) 30in paragraph (a), after “matter” insert “or an offshore transfer”, and

(b) in paragraph (c), for “or capital gains tax” substitute “, capital gains
tax or inheritance tax”.

(4) In sub-paragraph (3)—

(a) in paragraph (a), after “matter” insert “or an offshore transfer”, and

(b) 35in paragraph (c), for “or capital gains tax” substitute “, capital gains
tax or inheritance tax”.

(5) After sub-paragraph (4) insert—

(4A) If the liability to tax which would have been shown in the return
is a liability to inheritance tax, assets are treated for the purposes
40of sub-paragraph (4) as situated or held in a territory outside the
UK if they are so situated or held immediately after the transfer of
value by reason of which inheritance tax becomes chargeable.

(4B) Information “involves an offshore transfer” if—

(a) it does not involve an offshore matter,

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(b) it is information which would enable or assist HMRC to
assess P’s liability to income tax, capital gains tax or
inheritance tax,

(c) by failing to make the return, P deliberately withholds the
5information (whether or not the withholding of the
information is also concealed), and

(d) the applicable condition in paragraph 6AA is satisfied.

(6) In sub-paragraph (5), for the words following “if” substitute “it does not
involve an offshore matter or an offshore transfer”.

(7) 10In sub-paragraph (6)(a), after “matters” insert “or transfers”.

(8) Omit sub-paragraph (8).

(9) In sub-paragraph (9), after “paragraph” insert “and paragraph 6AA”.

17 After paragraph 6A insert—

6AA (1) This paragraph makes provision in relation to offshore transfers.

(2) 15Where the liability to tax which would have been shown in the
return is a liability to income tax, the applicable condition is
satisfied if the income on or by reference to which the tax is
charged, or any part of the income—

(a) is received in a territory outside the UK, or

(b) 20is transferred before the relevant date to a territory outside
the UK.

(3) Where the liability to tax which would have been shown in the
return is a liability to capital gains tax, the applicable condition is
satisfied if the proceeds of the disposal on or by reference to which
25the tax is charged, or any part of the proceeds—

(a) are received in a territory outside the UK, or

(b) are transferred before the relevant date to a territory
outside the UK.

(4) Where the liability to tax which would have been shown in the
30return is a liability to inheritance tax, the applicable condition is
satisfied if—

(a) the disposition that gives rise to the transfer of value by
reason of which the tax becomes chargeable involves a
transfer of assets, and

(b) 35after that disposition but before the relevant date the
assets, or any part of the assets, are transferred to a
territory outside the UK.

(5) In the case of a transfer falling within sub-paragraph (2)(b), (3)(b)
or (4)(b), references to the income, proceeds or assets transferred
40are to be read as including references to any assets derived from
or representing the income, proceeds or assets.

(6) In relation to an offshore transfer, the territory in question for the
purposes of paragraph 6A is the highest category of territory by
virtue of which the information involves an offshore transfer.

(7) 45“Relevant date” means the date on which P becomes liable to a
penalty under paragraph 6.

Finance (No. 2) BillPage 334

6AB Regulations under paragraph 21B of Schedule 24 to FA 2007
(location of assets etc) apply for the purposes of paragraphs 6A
and 6AA of this Schedule as they apply for the purposes of
paragraphs 4A and 4AA of that Schedule.

18 5In paragraph 15 (standard percentage reductions for disclosure), in the Table
in sub-paragraph (2), at the appropriate places insert—

87.5% 43.75% 25%”, and
“125% 62.5% 40%.

19 In paragraph 17(4) (interaction with other penalties and late payment
10surcharges), omit the “and” at the end of paragraph (b) and after that
paragraph insert—

(ba) if one of the penalties is a penalty under paragraph 6(3) or
(4) and the information withheld is category 1 information,
125%, and.

Section 121

15SCHEDULE 21 Penalties in connection with offshore asset moves

Penalty linked to offshore asset moves

1 (1) A penalty is payable by a person (“P”) where Conditions A, B and C are met.

(2) Condition A is that—

(a) 20P is liable for a penalty specified in paragraph 2 (“the original
penalty”), and

(b) the original penalty is for a deliberate failure (see paragraph 3).

(3) Condition B is that there is a relevant offshore asset move (see paragraph 4)
which occurs after the relevant time (see paragraph 5).

(4) 25Condition C is that—

(a) the main purpose, or one of the main purposes, of the relevant
offshore asset move is to prevent or delay the discovery by Her
Majesty’s Revenue and Customs (“HMRC”) of a potential loss of
revenue, and

(b) 30the original penalty relates to an inaccuracy or failure which relates
to the same potential loss of revenue.

Original penalties triggering penalties under this Schedule

2 The penalties referred to in paragraph 1(2) are—

(a) a penalty under paragraph 1 of Schedule 24 to FA 2007 (penalty for
35error in taxpayer’s document) in relation to an inaccuracy in a
document of a kind listed in the Table in paragraph 1 of that

Finance (No. 2) BillPage 335

Schedule, where the tax at stake is income tax, capital gains tax or
inheritance tax,

(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 (penalty for
failure to notify etc) in relation to the obligation under section 7 of
5TMA 1970 (obligation to give notice of liability to income tax or
capital gains tax), and

(c) a penalty under paragraph 6 of Schedule 55 to FA 2009 (penalty for
failures to make return etc where failure continues after 12 months),
where the tax at stake is income tax, capital gains tax or inheritance
10tax.

“Deliberate failure”

3 The original penalty is for a “deliberate failure” if—

(a) in the case of a penalty within paragraph 2(a), the inaccuracy to
which it relates was deliberate on P’s part (whether or not
15concealed);

(b) in the case of a penalty within paragraph 2(b), the failure by P was
deliberate (whether or not concealed);

(c) in the case of a penalty within paragraph 2(c), the withholding of the
information, resulting from the failure to make the return, is
20deliberate (whether or not concealed).

“Relevant offshore asset move”

4 (1) There is a “relevant offshore asset move” if, at a time when P is the beneficial
owner of an asset (“the qualifying time”)—

(a) the asset ceases to be situated or held in a specified territory and
25becomes situated or held in a non-specified territory,

(b) the person who holds the asset ceases to be resident in a specified
territory and becomes resident in a non-specified territory, or

(c) there is a change in the arrangements for the ownership of the asset,

and P remains the beneficial owner of the asset, or any part of it,
30immediately after the qualifying time.

(2) Whether a territory is a “specified territory” or “non-specified territory” is to
be determined, for the purposes of sub-paragraph (1), as at the qualifying
time.

(3) Where—

(a) 35an asset of which P is the beneficial owner (“the original asset”) is
disposed of, and

(b) all or part of any proceeds from the sale of the asset are (directly or
indirectly) reinvested in another asset of which P is also the
beneficial owner (“the new asset”),

40the original asset and the new asset are to be treated as the same asset for the
purposes of determining whether there is a relevant offshore asset move.

(4) “Asset” has the meaning given in section 21(1) of TCGA 1992, but also
includes sterling.

(5) “Specified territory” means a territory specified in regulations made by the
45Treasury by statutory instrument; and references to “non-specified
territory” are to be construed accordingly.

Finance (No. 2) BillPage 336

(6) Regulations under sub-paragraph (5) are subject to annulment in pursuance
of a resolution of the House of Commons.

“Relevant time”

5 (1) “The relevant time” has the meaning given by this paragraph.

(2) 5Where the original penalty is under Schedule 24 to FA 2007, the relevant
time is—

(a) if the tax at stake as a result of the inaccuracy is income tax or capital
gains tax, the beginning of the tax year to which the document
containing the inaccuracy relates, and

(b) 10if the tax at stake as a result of the inaccuracy is inheritance tax, the
time when liability to the tax first arises.

(3) Where the original penalty is for a failure to comply with an obligation
specified in the table in paragraph 1 of Schedule 41 of FA 2008, the relevant
time is the beginning of the tax year to which that obligation relates.

(4) 15Where the original penalty is for a failure to make a return or deliver a
document specified in the table in paragraph 1 of Schedule 55 to FA 2009, the
relevant time is—

(a) if the tax at stake is income tax or capital gains tax, the beginning of
the tax year to which the return or document relates, and

(b) 20if the tax at stake is inheritance tax, the time when liability to the tax
first arises.

Amount of the penalty

6 (1) The penalty payable under paragraph 1(1) is 50% of the amount of the
original penalty payable by P.

(2) 25The penalty payable under paragraph 1(1) is not a penalty determined by
reference to a liability to tax (despite the fact that the original penalty by
reference to which it is calculated may be such a penalty).

Assessment

7 (1) Where a person becomes liable for a penalty under paragraph 1(1), HMRC
30must—

(a) assess the penalty,

(b) notify the person, and

(c) state in the notice the tax period in respect of which the penalty is
assessed.

(2) 35A penalty under paragraph 1(1) must be paid before the end of the period of
30 days beginning with the day on which notification of the penalty is
issued.

(3) An assessment—

(a) is to be treated for procedural purposes in the same way as an
40assessment to tax (except in respect of a matter expressly provided
for by this Schedule),

(b) may be enforced as if it were an assessment to tax, and

(c) may be combined with an assessment to tax.

Finance (No. 2) BillPage 337

(4) An assessment of a penalty under paragraph 1(1) must be made within the
same period as that allowed for the assessment of the original penalty.

(5) If, after an assessment of a penalty is made under this paragraph, HMRC
amends the assessment, or makes a supplementary assessment, in respect of
5the original penalty, it must also at the same time amend the assessment, or
make a supplementary assessment, in respect of the penalty under
paragraph 1(1) to ensure that it is based on the correct amount of the original
penalty.

(6) In this paragraph—

(a) 10a reference to an assessment to tax, in relation to inheritance tax, is to
a determination, and

(b) “tax period” means a tax year, accounting period or other period in
respect of which tax is charged.

Appeal

8 (1) 15A person may appeal against a decision of HMRC that a penalty is payable
by the person.

(2) An appeal under this paragraph is to be treated in the same way as an appeal
against an assessment to, or determination of, the tax concerned (including
by the application of any provision about bringing the appeal by notice to
20HMRC, about HMRC review of the decision or about determination of the
appeal by the First-tier Tribunal or Upper Tribunal).

(3) Sub-paragraph (2) does not apply in respect of a matter expressly provided
for by this Schedule.

(4) On an appeal under this paragraph, the tribunal may affirm or cancel
25HMRC’s decision.

Commencement and transitionals

9 (1) This Schedule has effect in relation to relevant offshore asset moves
occurring after the day on which this Act is passed.

(2) For the purposes of this Schedule, it does not matter if liability for the
30original penalty first arose on or before that day, unless the case is one to
which sub-paragraph (3) applies.

(3) The original penalty is to be ignored if P’s liability for it for arose before the
day on which this Act is passed and before that day—

(a) if the original penalty was under Schedule 24 to FA 2007, any tax
35which was unpaid as a result of the inaccuracy has been assessed or
determined;

(b) if the original penalty was under Schedule 41 to FA 2008 or Schedule
55 to FA 2009, the failure to which it related was remedied and any
tax which was unpaid as a result of the failure has been assessed or
40determined.

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