Finance (No. 2) Bill (HC Bill 155)

(2) But the standard percentage may not be reduced to a percentage
that is below the minimum shown for it—

(a) in the case of a prompted disclosure, in column 2 of the
Table, and

(b) 5in the case of an unprompted disclosure, in column 3 of the
Table.

(3) But HMRC must not under this paragraph reduce a penalty below
£300.”

Section 153

20SCHEDULE 22 Asset-based penalty for offshore inaccuracies and failures

Part 1 Liability for penalty

Circumstances in which asset-based penalty is payable

1 (1) 25An asset-based penalty is payable by a person (P) where—

(a) one or more standard offshore tax penalties have been imposed on P
in relation to a tax year (see paragraphs 2 and 3), and

(b) the potential lost revenue threshold is met in relation to that tax year
(see paragraph 4).

(2) 30But this is subject to paragraph 6 (restriction on imposition of multiple asset-
based penalties in relation to the same asset).

Meaning of standard offshore tax penalty

2 (1) A standard offshore tax penalty is a penalty that falls within sub-paragraph
(2), (3) or (4).

(2) A penalty falls within this sub-paragraph if—

(a) it is imposed under paragraph 1 of Schedule 24 to FA 2007
(inaccuracy in taxpayer’s document),

(b) the inaccuracy for which the penalty is imposed involves an offshore
5matter or an offshore transfer,

(c) it is imposed for deliberate action (whether concealed or not), and

(d) the tax at stake is (or includes) capital gains tax, inheritance tax or
asset-based income tax.

(3) A penalty falls within this sub-paragraph if—

(a) 10it is imposed under paragraph 1 of Schedule 41 to FA 2008 (penalty
for failure to notify),

(b) the failure for which the penalty is imposed involves an offshore
matter or an offshore transfer,

(c) it is imposed for a deliberate failure (whether concealed or not), and

(d) 15the tax at stake is (or includes) capital gains tax or asset-based income
tax.

(4) A penalty falls within this sub-paragraph if—

(a) it is imposed under paragraph 6 of Schedule 55 to FA 2009 (penalty
for failure to make return more than 12 months after filing date),

(b) 20it is imposed for the withholding of information involving an
offshore matter or an offshore transfer,

(c) it is imposed for a deliberate withholding of information (whether
concealed or not), and

(d) the tax at stake is (or includes) capital gains tax, inheritance tax or
25asset-based income tax.

(5) In a case where the inaccuracy, failure or withholding of information for
which a penalty is imposed involves both an offshore matter or an offshore
transfer and a domestic matter, the standard offshore tax penalty is only that
part of the penalty that involves the offshore matter or offshore transfer.

(6) 30In a case where the tax at stake in relation to a penalty includes a tax other
than capital gains tax, inheritance tax or asset-based income tax, the
standard offshore tax penalty is only that part of the penalty which relates to
capital gains tax, inheritance tax or asset-based income tax.

(7) “Asset-based income tax” means income tax that is charged under any of the
35provisions mentioned in column 1 of the table in paragraph 13(2).

Tax year to which standard offshore tax penalty relates

3 (1) Where a standard offshore tax penalty is imposed under paragraph 1 of
Schedule 24 to FA 2007, the tax year to which that penalty relates is—

(a) if the tax at stake as a result of the inaccuracy is income tax or capital
40gains tax, the tax year to which the document containing the
inaccuracy relates;

(b) if the tax at stake as a result of the inaccuracy is inheritance tax, the
year, beginning on 6 April and ending on the following 5 April, in
which the liability to tax first arose.

(2) 45Where a standard offshore tax penalty is imposed under paragraph 1 of
Schedule 41 to FA 2008 for a failure to comply with an obligation specified

in the table in that paragraph, the tax year to which that penalty relates is the
tax year to which the obligation relates.

(3) Where a standard offshore tax penalty is imposed under paragraph 6 of
Schedule 55 to FA 2009 for a failure to make a return or deliver a document
5specified in the table of paragraph 1 of that Schedule, the tax year to which
that penalty relates is—

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

(b) if the tax at stake is inheritance tax, the year, beginning on 6 April
10and ending on the following 5 April, in which the liability to tax first
arose.

Potential lost revenue threshold

4 (1) The potential lost revenue threshold is reached where the offshore PLR in
relation to a tax year exceeds £25,000.

(2) 15The Treasury may by regulations change the figure for the time being
specified in sub-paragraph (1).

(3) Regulations under sub-paragraph (2) are to be made by statutory
instrument.

(4) A statutory instrument containing regulations under sub-paragraph (2) is
20subject to annulment in pursuance of a resolution of the House of Commons.

(5) Regulations under sub-paragraph (2)—

(a) may make different provision for different purposes;

(b) may contain supplemental, incidental, consequential, transitional
and transitory provision.

25Offshore PLR

5 (1) The offshore PLR, in relation to a tax year, is the total of—

(a) the potential lost revenue (in the case of a standard offshore tax
penalty imposed under Schedule 24 to FA 2007 or Schedule 41 to FA
2008), and

(b) 30the liability to tax (in the case of a standard offshore tax penalty
imposed under Schedule 55 to FA 2009),

by reference to which all of the standard offshore tax penalties imposed on
P in relation to the tax year are assessed.

(2) Sub-paragraphs (3) to (5) apply where—

(a) 35a penalty is imposed on P under paragraph 1 of Schedule 24 to FA
2007, paragraph 1 of Schedule 41 to FA 2008 or paragraph 6 of
Schedule 55 to FA 2009, and

(b) the potential lost revenue or liability to tax by reference to which the
penalty is assessed relates to a standard offshore tax penalty and one
40or more other penalties.

In this paragraph, such a penalty is referred to as a “combined penalty”.

(3) Only the potential lost revenue or liability to tax relating to the standard
offshore tax penalty is to be taken into account in calculating the offshore
PLR.

(4) Where the calculation of the potential lost revenue or liability to tax by
reference to which a combined penalty is assessed depends on the order in
which income or gains are treated as having been taxed, for the purposes of
calculating the offshore PLR—

(a) 5income and gains relating to domestic matters are to be taken to have
been taxed before income and gains relating to offshore matters and
offshore transfers;

(b) income and gains relating to taxes that are not capital gains tax,
inheritance tax or asset-based income tax are to be taken to have been
10taxed before income and gains relating to capital gains tax,
inheritance tax and asset-based income tax.

(5) In a case where it cannot be determined—

(a) whether income or gains relate to an offshore matter or offshore
transfer or to a domestic matter, or

(b) 15whether income or gains relate to capital gains tax, asset-based
income tax or inheritance tax or not,

for the purposes of calculating the offshore PLR, the potential lost revenue
or liability to tax relating to the standard offshore tax penalty is to be taken
to be such share of the total potential lost revenue or liability to tax by
20reference to which the combined penalty was calculated as is just and
reasonable.

(6) Sub-paragraph (7) applies where—

(a) a standard offshore tax penalty or a combined penalty is imposed on
P, and

(b) 25there are two or more taxes at stake, including capital gains tax and
asset-based income tax.

(7) Where the calculation of the potential lost revenue or liability to tax by
reference to which the penalty is assessed depends on the order in which
income or gains are treated as having been taxed, for the purposes of
30calculating the offshore PLR, income and gains relating to asset-based
income tax are to be taken to have been taxed before income and gains
relating to capital gains tax.

Restriction on imposition of multiple asset-based penalties in relation to the same asset

6 (1) Sub-paragraphs (2) and (3) apply where—

(a) 35a standard offshore tax penalty has been imposed on P, and

(b) the potential lost revenue threshold is met,

in relation to more than one tax year falling within the same investigation
period.

(2) Only one asset-based penalty is payable by P in the investigation period in
40relation to any given asset.

(3) The asset-based penalty is to be charged by reference to the tax year in the
investigation period with the highest offshore PLR.

(4) An “investigation period” is—

(a) the period starting with the day on which this Schedule comes into
45force and ending with the last day of the last tax year before P was
notified of an asset-based penalty in respect of an asset, and

(b) subsequent periods beginning with the day after the previous period
ended and ending with the last day of the last tax year before P is
notified of a subsequent asset-based penalty in respect of the asset,

and different investigation periods may apply in relation to different assets.

5Part 2 Amount of penalty

Standard amount of asset-based penalty

7 (1) The standard amount of the asset-based penalty is the lower of—

(a) 10% of the value of the asset, and

(b) 10offshore PLR x 10.

(2) See also—

(a) paragraphs 8 and 9, which provide for reductions in the standard
amount, and

(b) Part 3, which makes provision about the identification and valuation
15of the asset.

Reductions for disclosure and co-operation

8 (1) HMRC must reduce the standard amount of the asset-based penalty where
P does all of the following things—

(a) makes a disclosure of the inaccuracy or failure relating to the
20standard offshore tax penalty;

(b) provides HMRC with a reasonable valuation of the asset;

(c) provides HMRC with information or access to records that HMRC
requires from P for the purposes of valuing the asset.

(2) A reduction under sub-paragraph (1) must reflect the quality of the
25disclosure, valuation and information provided (and for these purposes
“quality” includes timing, nature and extent).

(3) The Treasury must make regulations setting out the maximum amount of
the penalty reduction under sub-paragraph (1).

(4) The maximum amount may differ according to whether the case involves
30only unprompted disclosures or involves prompted disclosures.

(5) A case involves only unprompted disclosures where—

(a) in a case where the asset-based penalty relates to only one standard
offshore tax penalty, that standard offshore tax penalty was reduced
on the basis of an unprompted disclosure, or

(b) 35in a case where the asset-based penalty relates to more than one
standard offshore tax penalty, all of those standard offshore tax
penalties were reduced on the basis of unprompted disclosures.

(6) A case involves prompted disclosures where any of the standard offshore
tax penalties to which the asset-based penalty relates was reduced on the
40basis of a prompted disclosure.

(7) Regulations under sub-paragraph (3) are to be made by statutory
instrument.

(8) A statutory instrument containing regulations under sub-paragraph (3) is
subject to annulment in pursuance of a resolution of the House of Commons.

(9) Regulations under sub-paragraph (3)—

(a) may make different provision for different purposes;

(b) 5may contain supplemental, incidental, consequential, transitional
and transitory provision.

Special reduction

9 (1) If HMRC think it right because of special circumstances, they may reduce
the standard amount of the asset-based penalty.

(2) 10In sub-paragraph (1) “special circumstances” does not include—

(a) ability to pay, or

(b) the fact that a potential loss of revenue from one taxpayer is balanced
by a potential over-payment by another.

(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference
15to—

(a) staying a penalty, and

(b) agreeing a compromise in relation to proceedings for a penalty.

Part 3 Identification and valuation of assets

20Introduction

10 (1) This Part makes provision about the identification and valuation of the asset
for the purposes of calculating the amount of the asset-based penalty.

(2) An asset-based penalty may relate to more than one asset.

(3) The identification and valuation of the asset is to be determined—

(a) 25under paragraph 11 where the principal tax at stake is capital gains
tax,

(b) under paragraph 12 where the principal tax at stake is inheritance
tax, and

(c) under paragraph 13 where the principal tax at stake is asset-based
30income tax.

See also paragraph 14 (jointly held assets).

(4) The principal tax at stake—

(a) in a case where the standard offshore tax penalty (or penalties)
relates to only one type of tax, is the tax to which that standard
35offshore tax penalty (or penalties) relates;

(b) in a case where the standard offshore tax penalty (or penalties) relate
to more than one type of tax, is the tax which gives rise to the highest
offshore PLR value.

(5) The offshore PLR value, in relation to a type of tax, is the potential lost
40revenue or liability to tax by reference to which the part of the penalty
relating to that type of tax was assessed.

(6) The rules in paragraph 5(2) to (7) apply for the purposes of calculating the
offshore PLR value, in relation to a type of tax, as they apply for the purposes
of calculating the offshore PLR.

Capital gains tax

11 (1) 5This paragraph applies where the principal tax at stake is capital gains tax.

(2) The asset is the asset that is the subject of the disposal (or deemed disposal)
on or by reference to which the capital gains tax to which the standard
offshore penalty relates is charged.

(3) For the purposes of calculating the amount of the asset-based penalty, the
10value of the asset is to be taken to be the consideration for the disposal of the
asset that would be used in the computation of the gain under TCGA 1992
(other than in a case where sub-paragraph (4) applies).

(4) In a case where the disposal on or by reference to which the capital gains tax
is charged is a part disposal of an asset, the asset-based penalty is to be
15calculated by reference to the full market value of the asset immediately
before the part disposal took place.

(5) Terms used in this paragraph have the same meaning as in TCGA 1992.

Inheritance tax

12 (1) This paragraph applies where the principal tax at stake is inheritance tax.

(2) 20The asset is the property the disposition of which gave rise to the transfer of
value by reason of which the inheritance tax to which the standard offshore
penalty relates became chargeable.

(3) For the purposes of calculating the amount of the asset-based penalty, the
value of the property is to be the value of the property used by HMRC in
25assessing the liability to inheritance tax.

(4) Terms used in this paragraph have the same meaning as in IHTA 1984.

Asset-based income tax

13 (1) This paragraph applies where the principal tax at stake is asset-based
income tax.

(2) 30Where the standard offshore tax penalty relates to income tax charged under
a provision shown in column 1 of the Table, the asset is the asset mentioned
in column 2 of the Table.

(3) For the purposes of calculating the amount of the asset-based penalty, the
asset is to be valued as follows.

(4) 40In a case where the charge to income tax was triggered by a disposal of the
asset, the value of the asset is to be taken as its market value on the date of
disposal (and in the case of a part disposal, the value of the asset is to be
taken as its full market value immediately before the part disposal took
place).

(5) In any other case—

(a) where P still owns the asset on the last day of the tax year to which
the standard offshore tax penalty relates, the value of the asset is to
be taken as its market value on that day;

(b) 5where P disposed of the asset during the course of the tax year to
which the standard offshore tax penalty relates, the value of the asset
is to be taken as its market value on the date of disposal;

(c) where P disposed of part of the asset during the course of the tax year
to which the standard offshore tax penalty relates, the value of the
10asset is to be taken as the market value of the part disposed on the
date (or dates) of disposal plus the market value of the part still
owned by the person on the last day of that tax year.

(6) But if the value of the asset, as determined in accordance with sub-
paragraphs (4) and (5), does not appear to HMRC to be a fair and reasonable
15value, then HMRC may value the asset for the purposes of this Schedule in
any other way which appears to them to be fair and reasonable.

(7) For the purposes of sub-paragraph (5)—

(a) P owns an asset if P is liable to asset-based income tax in relation to
that asset;

(b) 20references to a disposal (and related expressions) have the same
meaning as in TCGA 1992.

(8) In this paragraph “market value” has the same meaning as in TCGA 1992
(see section 272 of that Act).

(9) Other terms used in this paragraph have the same meaning as in ITTOIA
252005.

Jointly held assets

14 (1) This paragraph applies where an asset-based penalty is chargeable in
relation to an asset that is jointly held by P and another person (A).

(2) The value of the asset is to be taken to be the value of P’s share of the asset.

(3) 30In a case where P and A—

(a) are married to, or are civil partners of, each other, and

(b) live together,

the asset is to be taken to be jointly owned by P and A in equal shares, unless
it appears to HMRC that this is not the case.

35Part 4 Procedure

Assessment

15 (1) Where a person (P) becomes liable for an asset-based penalty under
paragraph 1, HMRC must—

(a) 40assess the penalty,

(b) notify P, and

(c) state in the notice—

(i) the tax year to which the penalty relates, and

(ii) the investigation period within which that tax year falls (see
paragraph 6).

(2) A penalty under paragraph 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) 5An assessment—

(a) is to be treated for procedural purposes in the same way as an
assessment 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) 10may be combined with an assessment to tax.

(4) An assessment of an asset-based penalty under paragraph 1 must be made
within the period allowed for making an assessment of the standard
offshore tax penalty to which the asset-based penalty relates (and where an
asset-based penalty relates to more than one standard offshore tax penalty,
15the assessment must be made within the latest of those periods).

(5) In this Part of this Schedule references to an assessment to tax, in relation to
inheritance tax, are to a determination.

Appeal

16 (1) P may appeal against a decision of HMRC that a penalty is payable by P.

(2) 20P may appeal against a decision of HMRC as to the amount of a penalty
payable by P.

17 (1) An appeal is to be treated in the same way as an appeal against an
assessment to the tax concerned (including by the application of any
provision about bringing the appeal by notice to HMRC, about HMRC
25review of the decision or about determination of the appeal by the First-tier
Tribunal or the Upper Tribunal).

(2) Sub-paragraph (1) does not apply—

(a) so as to require P to pay a penalty before an appeal against the
assessment of the penalty is determined, or

(b) 30in respect of any other matter expressly provided for by this
Schedule.

18 (1) On an appeal under paragraph 16(1), the tribunal may affirm or cancel
HMRC’s decision.

(2) On an appeal under paragraph 16(2), the tribunal may—

(a) 35affirm HMRC’s decision, or

(b) substitute for HMRC’s decision another decision that HMRC had
power to make.

(3) If the tribunal substitutes its decision for HMRC’s, the tribunal may rely on
paragraph 9—

(a) 40to the same extent as HMRC (which may mean applying the same
percentage reduction as HMRC to a different starting point), or

(b) to a different extent, but only if the tribunal thinks that HMRC’s
decision in respect of the application of paragraph 9 was flawed.