Finance Bill

House of Commons

Session 2006 - 07
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Finance Bill

Finance Bill
Schedule 23 — Extension of HMRC powers: Scotland
261

23P
Offences arising from breach of requirements under sections 23M and
23N
(1)
A person mentioned in paragraph (a) of subsection (1) of section 23M
of this Act who, having been required—
(a)
under that subsection to give the information mentioned in
5
subsection (2) of that section;
(b)
under subsection (3) of that section to remain with an officer;
or
(c)
under subsection (1) of section 23N of this Act to provide that
person’s fingerprints or a record such as is mentioned in
10
paragraph (b) of that subsection,

fails, without reasonable excuse, to do so, shall be guilty of an offence
and liable on summary conviction to a fine not exceeding level 3 on
the standard scale.
(2)
A person mentioned in paragraph (b) of subsection (1) of section 23M
15
of this Act who, having been required under that subsection to give
the information mentioned in subsection (2) of that section, fails,
without reasonable excuse, to do so, shall be guilty of an offence and
liable on summary conviction to a fine not exceeding level 2 on the
standard scale.
20
(3)
An authorised officer may arrest without warrant any person whom
the officer has reasonable grounds for suspecting has committed an
offence under subsection (1) or (2) above.”
4
In section 24 (detention and questioning by customs officers)—
(a)
in subsection (1)—
25
(i)
for “an offence punishable by imprisonment relating to an
assigned matter” substitute “a Revenue and Customs offence
punishable by imprisonment”,
(ii)
for “a customs office” substitute “an office of Revenue and
Customs”, and
30
(iii)
for “customs office”, in the second place, substitute “office of
Revenue and Customs”,
(b)
in subsection (5), for “customs office” (in both places) substitute
“office of Revenue and Customs”,
(c)
in subsection (8)—
35
(i)
for “his name and address” substitute “the information
mentioned in subsection (8A) below”, and
(ii)
for “customs office” substitute “office of Revenue and
Customs”,
(d)
after that subsection insert—
40
“(8A)
That information is—
(a)
the person’s name;
(b)
the person’s address;
(c)
the person’s date of birth;
(d)
the person’s place of birth (in such detail as the officer
45
considers necessary or expedient for the purpose of
establishing that person’s identify); and
(e)
the person’s nationality.”,
(e)
omit subsection (9), and

Finance Bill
Schedule 23 — Extension of HMRC powers: Scotland
262

(f)
the heading accordingly becomes “Detention and questioning at
office of Revenue and Customs”.
5
In section 25(1) (right to have someone informed of the fact of detention)—
(a)
for “a customs office” substitute “an office of Revenue and Customs”,
and
5
(b)
for “customs office”, in the second and third places, substitute “office
of Revenue and Customs”.
6
In section 26 (detention in connection with drug smuggling offences), for “a
customs office” (in both places) substitute “an office of Revenue and
Customs”.
10
7
After that section insert—
“Power of arrest
26A
Power of arrest

Where an authorised officer has reasonable grounds for suspecting
that a Revenue and Customs offence has been or is being committed,
15
the officer may arrest without warrant any person whom the officer
has reasonable grounds for suspecting to be guilty of the offence.
General provisions
26B
Interpretation of Part 3 etc
(1)
In this Part of this Act—
20
“authorised officer” means an officer acting with the authority
(which may be general or specific) of the Commissioners for
Her Majesty’s Revenue and Customs;
“office of Revenue and Customs” means premises wholly or
partly occupied by Her Majesty’s Revenue and Customs; and
25
“officer” means an officer of Revenue and Customs.
(2)
In any proceedings (whether civil or criminal) under or arising from
this Part of this Act, a certificate of the Commissioners for Her
Majesty’s Revenue and Customs that an officer had authority to
exercise a power or function conferred by a provision of this Part
30
shall be conclusive proof of that fact.”
Criminal Procedure (Scotland) Act 1995 (c. 46)
8
Section 307 of the Criminal Procedure (Scotland) Act 1995 (interpretation) is
amended as follows.
9
In subsection (1), in the definition of “officer of law”, for paragraph (ba)
35
substitute—
“(ba)
subject to subsection (1A) below, an officer of Revenue and
Customs acting with the authority (which may be general
or specific) of the Commissioners for Her Majesty’s
Revenue and Customs;”.
40

Finance Bill
Schedule 23 — Extension of HMRC powers: Scotland
263

10
After that subsection insert—
“(1A)
The inclusion of officers of Revenue and Customs as “officers of law”
shall not have effect in relation to any matter specified in—
(a)
section 54(4)(b) or (f) of; or
(b)
paragraphs 3, 7, 10, 13 to 15, 19 or 24 to 29 of Schedule 1 to,
5

the Commissioners for Revenue and Customs Act 2005 (former
Inland Revenue matters).
(1B)
In any proceedings (whether civil or criminal) under or arising from
this Act, a certificate of the Commissioners for Her Majesty’s
Revenue and Customs that an officer of Revenue and Customs had
10
the authority to exercise a power or function conferred by a
provision of this Act shall be conclusive evidence of that fact.”
Criminal Justice and Police Act 2001 (c. 16)
11
The Criminal Justice and Police Act 2001 is amended as follows.
12
In section 63(2) (powers to obtain hard copies etc of information stored in
15
electronic form), after paragraph (g) insert—
“(ga)
section 23E(5)(b) (as read with section 23K(2)) of the Criminal
Law (Consolidation) (Scotland) Act 1995;”.
13
In Schedule 1—
(a)
in Part 1, after paragraph 59 insert—
20
“Criminal Law (Consolidation) (Scotland) Act 1995 (c. 39)
59A
The power of seizure conferred by section 23E(3) of the
Criminal Law (Consolidation) (Scotland) Act 1995 (seizure
of evidence of Revenue and Customs offences).”, and
(b)
in Part 2, after paragraph 81 insert—
25
“Criminal Law (Consolidation) (Scotland) Act 1995 (c. 39)
81A
The power of seizure conferred by section 23E(3) (as read
with section 23E(5)(c)) of the Criminal Law
(Consolidation) (Scotland) Act 1995 (seizure of evidence of
Revenue and Customs offences).”
30
14    (1)
The amendments made by this Schedule come into force in accordance with
provision made by the Treasury by order.
      (2)
The power to make an order under this paragraph is exercisable by statutory
instrument.

Finance Bill
Schedule 24 — Penalties for errors
Part 1 — Liability for penalty
264

Schedule 24
Section 96

Penalties for errors
Part 1
Liability for penalty
Error in taxpayer’s document
5
1     (1)
A penalty is payable by a person (P) where—
(a)
P gives HMRC a document of a kind listed in the Table below, and
(b)
Conditions 1 and 2 are satisfied.
      (2)
Condition 1 is that the document contains an inaccuracy which amounts to,
or leads to—
10
(a)
an understatement of P’s liability to tax,
(b)
a false or inflated statement of a loss by P, or
(c)
a false or inflated claim to repayment of tax.
      (3)
Condition 2 is that the inaccuracy was careless or deliberate (within the
meaning of paragraph 3).
15
      (4)
Where a document contains more than one inaccuracy, a penalty is payable
for each inaccuracy.

Tax
Document

Income tax or capital gains tax
Return under section 8 of TMA 1970

(personal return).

20

Income tax or capital gains tax
Return under section 8A of TMA

1970 (trustee’s return).

Income tax or capital gains tax
Return, statement or declaration in

connection with a claim for an

allowance, deduction or relief.

25

Income tax or capital gains tax
Accounts in connection with

ascertaining liability to tax.

Income tax or capital gains tax
Partnership return.

Income tax or capital gains tax
Statement or declaration in

connection with a partnership

30

return.

Income tax or capital gains tax
Accounts in connection with a

partnership return.

Income tax
Return for the purposes of PAYE

regulations.

35

Construction industry deductions
Return for the purposes of

regulations under section 70(1)(a) of

FA 2004 in connection with

deductions on account of tax under

the Construction Industry Scheme.

40

Finance Bill
Schedule 24 — Penalties for errors
Part 1 — Liability for penalty
265

Tax
Document

Corporation tax
Company tax return under

paragraph 3 of Schedule 18 to FA

1998.

Corporation tax
Return, statement or declaration in

5

connection with a claim for an

allowance, deduction or relief.

Corporation tax
Accounts in connection with

ascertaining liability to tax.

VAT
VAT return under regulations made

10

under paragraph 2 of Schedule 11 to

VATA 1994.

VAT
Return, statement or declaration in

connection with a claim.

Income tax, capital gains tax,
Any document which is likely to be

15

corporation tax or VAT
relied upon by HMRC to determine,

without further inquiry, a question

about—

(a)
P’s liability to tax,

(b)
payments by P by way of

20

or in connection with tax,

(c)
any other payment by P

(including penalties), or

(d)
repayments, or any other

kind of payment or credit,

25

to P.

Under-assessment by HMRC
2     (1)
A penalty is payable by a person (P) where—
(a)
an assessment issued to P by HMRC understates P’s liability to tax,
and
30
(b)
P has failed to take reasonable steps to notify HMRC, within the
period of 30 days beginning with the date of the assessment, that it is
an under-assessment.
      (2)
In deciding what steps (if any) were reasonable HMRC must consider—
(a)
whether P knew, or should have known, about the under-
35
assessment, and
(b)
what steps would have been reasonable to take to notify HMRC.
      (3)
In sub-paragraph (1) “tax” means—
(a)
income tax,
(b)
capital gains tax,
40
(c)
corporation tax, and
(d)
VAT.
Degrees of culpability
3     (1)
Inaccuracy in a document given by P to HMRC is—
(a)
“careless” if the inaccuracy is due to failure by P to take reasonable
45
care,
(b)
“deliberate but not concealed” if the inaccuracy is deliberate but P
does not make arrangements to conceal it, and

Finance Bill
Schedule 24 — Penalties for errors
Part 2 — Amount of penalty
266

(c)
“deliberate and concealed” if the inaccuracy is deliberate and P
makes arrangements to conceal it (for example, by submitting false
evidence in support of an inaccurate figure).
      (2)
An inaccuracy in a document given by P to HMRC, which was neither
careless nor deliberate when the document was given, is to be treated as
5
careless if P—
(a)
discovered the inaccuracy at some later time, and
(b)
did not take reasonable steps to inform HMRC.
Part 2
Amount of penalty
10
Standard amount
4     (1)
The penalty payable under paragraph 1 is—
(a)
for careless action, 30% of the potential lost revenue,
(b)
for deliberate but not concealed action, 70% of the potential lost
revenue, and
15
(c)
for deliberate and concealed action, 100% of the potential lost
revenue.
      (2)
The penalty payable under paragraph 2 is 30% of the potential lost revenue.
      (3)
Paragraphs 5 to 8 define “potential lost revenue”.
Potential lost revenue: normal rule
20
5     (1)
“The potential lost revenue” in respect of an inaccuracy in a document or a
failure to notify an under-assessment is the additional amount due or
payable in respect of tax as a result of correcting the inaccuracy or
assessment.
      (2)
The reference in sub-paragraph (1) to the additional amount due or payable
25
includes a reference to—
(a)
an amount payable to HMRC having been erroneously paid by way
of repayment of tax, and
(b)
an amount which would have been repayable by HMRC had the
inaccuracy or assessment not been corrected.
30
      (3)
In sub-paragraph (1) “tax” includes national insurance contributions.
      (4)
The following shall be ignored in calculating potential lost revenue under
this paragraph—
(a)
group relief, and
(b)
section 419(4) of ICTA (close company: relief for loans);
35

(but this sub-paragraph does not prevent a penalty being charged in respect
of an inaccurate claim for relief).
Potential lost revenue: multiple errors
6     (1)
Where P is liable to a penalty in respect of more than one inaccuracy, and the
calculation of potential lost revenue under paragraph 5 in respect of each
40
inaccuracy depends on the order in which they are corrected—

Finance Bill
Schedule 24 — Penalties for errors
Part 2 — Amount of penalty
267

(a)
careless inaccuracies shall be taken to be corrected before deliberate
inaccuracies, and
(b)
deliberate but not concealed inaccuracies shall be taken to be
corrected before deliberate and concealed inaccuracies.
      (2)
In calculating potential lost revenue where P is liable to a penalty in respect
5
of one or more understatements in one or more documents relating to a tax
period, account shall be taken of any overstatement in any document given
by P which relates to the same tax period.
      (3)
In sub-paragraph (2)—
(a)
“understatement” means an inaccuracy that satisfies Condition 1 of
10
paragraph 1, and
(b)
“overstatement” means an inaccuracy that does not satisfy that
condition.
      (4)
For the purposes of sub-paragraph (2) overstatements shall be set against
understatements in the following order—
15
(a)
understatements in respect of which P is not liable to a penalty,
(b)
careless understatements,
(c)
deliberate but not concealed understatements, and
(d)
deliberate and concealed understatements.
      (5)
In calculating potential lost revenue in respect of a document given by or on
20
behalf of P no account shall be taken of the fact that a potential loss of
revenue from P is or may be balanced by a potential over-payment by
another person (except to the extent that an enactment requires or permits a
person’s tax liability to be adjusted by reference to P’s).
Potential lost revenue: losses
25
7     (1)
Where an inaccuracy has the result that a loss is wrongly recorded for
purposes of direct tax and the loss has been wholly used to reduce the
amount due or payable in respect of tax, the potential lost revenue is
calculated in accordance with paragraph 5.
      (2)
Where an inaccuracy has the result that a loss is wrongly recorded for
30
purposes of direct tax and the loss has not been wholly used to reduce the
amount due or payable in respect of tax, the potential lost revenue is—
(a)
the potential lost revenue calculated in accordance with paragraph 5
in respect of any part of the loss that has been used to reduce the
amount due or payable in respect of tax, plus
35
(b)
10% of any part that has not.
      (3)
Sub-paragraphs (1) and (2) apply both—
(a)
to a case where no loss would have been recorded but for the
inaccuracy, and
(b)
to a case where a loss of a different amount would have been
40
recorded (but in that case sub-paragraphs (1) and (2) apply only to
the difference between the amount recorded and the true amount).
      (4)
Where an inaccuracy has the effect of creating or increasing an aggregate
loss recorded for a group of companies—
(a)
the potential lost revenue shall be calculated in accordance with this
45
paragraph, and