Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill (Volume II)
Schedule 41 — Penalties: failure to notify and certain VAT and excise wrongdoing
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Tax to which obligation relates
Obligation

Alcohol liquor duties
Obligation to be authorised and

registered to obtain and use duty

stamps under regulations under

paragraph 4 of Schedule 2A to

ALDA 1979 (duty stamps).

Alcohol liquor duties
Obligations under sections 12(1),

47(1), 54(2), 55(2) and 62(2) of ALDA

1979 (obligations to hold licence to

manufacture spirits, register to brew

beer, hold licence to produce wine

or made-wine and register to make

cider).

Alcohol liquor duties
Obligation to have plant and

processes approved for the

manufacture of spirits under

regulations under section 15(6) of

ALDA 1979 (distillers’ warehouses).

Tobacco products duty
Obligation to manufacture tobacco

products only on premises

registered under regulations under

section 7 of TPDA 1979

(management of tobacco products

duty).

Hydrocarbon oil duties
Obligation to make entry of

premises intended to be used for

production of oil under regulations

under section 21 of HODA 1979

(administration and enforcement).

Excise duties
Obligation to receive, deposit or

hold duty suspended excise goods

only in premises approved under

regulations under section 92 of

CEMA 1979 (approval of

warehouses).

Excise duties
Obligation to receive duty

suspended excise goods only if

approved or registered (or

approved and registered) as a REDS

or an Occasional Importer under

regulations under section 100G or

100H of CEMA 1979 (registered

excise dealers and shippers etc).

Excise duties
Obligation to receive, deposit or

hold duty suspended excise goods

only if approved or registered (or

approved and registered) as a

registered owner, a duty

representative, a registered mobile

operator or a fiscal representative of

a registered mobile operator or an

authorised warehousekeeper under

regulations under section 100G or

100H of CEMA 1979 (registered

excise dealers and shippers etc).

General betting duty
Obligations under paragraph 4(1) to

(3) of Schedule 1 to BGDA 1981

(obligation to notify intention to

carry on general betting business

and make entry of, or notify,

premises).

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Schedule 41 — Penalties: failure to notify and certain VAT and excise wrongdoing
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Tax to which obligation relates
Obligation

Pool betting duty
Obligations under paragraphs 4(2)

and 5(1) of Schedule 1 to BGDA

1981 (obligation to make entry and

hold permit for carrying on pool

betting business).

Bingo duty
Obligations under paragraph 10(1)

and (1A) of Schedule 3 to BGDA

1981 (obligation to notify and

register in respect of bingo-

promotion).

Lottery duty
Obligation under section 29(1) of FA

1993 (obligation to register in

respect of promotion of lotteries).

Gaming duty
Obligations under paragraphs 3 and

6 of Schedule 1 to FA 1997

(obligations to register in respect of

gaming and to notify premises).

Remote gaming duty
Obligation to register under

regulations under section 26J of

BGDA 1981 (facilities for remote

gaming).

Amusement machine licence duty
Obligation under section 21 of

BGDA 1981 (obligation to licence

amusement machine or premises on

which amusement machine is

provided for play).

Issue of invoice showing VAT by unauthorised person
2     (1)
A penalty is payable by a person (P) where P makes an unauthorised issue
of an invoice showing VAT.
      (2)
P makes an unauthorised issue of an invoice showing VAT if P—
(a)
is an unauthorised person, and
(b)
issues an invoice showing an amount as being value added tax or as
including an amount attributable to value added tax.
      (3)
In sub-paragraph (2)(a) “an unauthorised person” means anyone other
than—
(a)
a person registered under VATA 1994,
(b)
a body corporate treated for the purposes of section 43 of that Act as
a member of a group,
(c)
a person treated as a taxable person under regulations under section
46(4) of that Act,
(d)
a person authorised to issue an invoice under regulations under
paragraph 2(12) of Schedule 11 to that Act, or
(e)
a person acting on behalf of the Crown.
      (4)
This paragraph has effect in relation to any invoice which—
(a)
for the purposes of any provision made under subsection (3) of
section 54 of VATA 1994 shows an amount as included in the
consideration for any supply, and

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(b)
either fails to comply with the requirements of any regulations under
that section or is issued by a person who is not for the time being
authorised to do so for the purposes of that section,

as if the person issuing the invoice were an unauthorised person and that
amount were shown on the invoice as an amount attributable to value added
tax.
Putting product to use that attracts higher duty
3     (1)
A penalty is payable by a person (“P”) where P does an act which enables
HMRC to assess an amount as duty due from P under any of the provisions
in the Table below (a “relevant excise provision”).

Provision under which assessment may
Subject-matter of provision

be made

ALDA 1979 section 8(4)
Spirits for use for medical or

scientific purposes.

ALDA 1979 section 10(4)
Spirits for use in art or manufacture.

ALDA 1979 section 11(3)
Imported goods not for human

consumption containing spirits.

HODA 1979 section 10(3)
Duty-free oil.

HODA 1979 section 13(1A)
Rebated heavy oil.

HODA 1979 section 13AB(1)(a) or
Kerosene.

(2)(a)

HODA 1979 section 13AD(2)
Kerosene.

HODA 1979 section 13ZB(1)
Heating oil etc.

HODA 1979 section 14(4)
Light oil for use as furnace oil.

HODA 1979 section 14D(1)
Rebated biodiesel or bioblend.

HODA 1979 section 14F(2)
Rebated heavy oil or bioblend.

HODA 1979 section 23(1B)
Road fuel gas on which no duty

paid.

HODA 1979 section 24(4A)
Duty-free and rebated oil.

      (2)
A penalty is payable by a person (“P”) where P supplies a product knowing
that it will be used in a way which enables HMRC to assess an amount as
duty due from another person under a relevant excise provision.
Handling goods subject to unpaid excise duty
4     (1)
A penalty is payable by a person (P) where—
(a)
after the excise duty point for any goods which are chargeable with
a duty of excise, P acquires possession of the goods or is concerned
in carrying, removing, depositing, keeping or otherwise dealing with
the goods, and

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(b)
at the time when P acquires possession of the goods or is so
concerned, a payment of duty on the goods is outstanding and has
not been deferred.
      (2)
In sub-paragraph (1)—
“excise duty point” has the meaning given by section 1 of F(No.2)A
1992, and
“goods” has the meaning given by section 1(1) of CEMA 1979.
Degrees of culpability
5     (1)
A failure by P to comply with a relevant obligation is—
(a)
“deliberate and concealed” if the failure is deliberate and P makes
arrangements to conceal the situation giving rise to the obligation,
and
(b)
“deliberate but not concealed” if the failure is deliberate but P does
not make arrangements to conceal the situation giving rise to the
obligation.
      (2)
The making by P of an unauthorised issue of an invoice showing VAT is—
(a)
“deliberate and concealed” if it is done deliberately and P makes
arrangements to conceal it, and
(b)
“deliberate but not concealed” if it is done deliberately but P does not
make arrangements to conceal it.
      (3)
The doing by P of an act which enables HMRC to assess an amount of duty
as due from P under a relevant excise provision is—
(a)
“deliberate and concealed” if it is done deliberately and P makes
arrangements to conceal it, and
(b)
“deliberate but not concealed” if it is done deliberately but P does not
make arrangements to conceal it.
      (4)
P’s acquiring possession of, or being concerned in dealing with, goods on
which a payment of duty is outstanding and has not been deferred is—
(a)
“deliberate and concealed” if it is done deliberately and P makes
arrangements to conceal it, and
(b)
“deliberate but not concealed” if it is done deliberately but P does not
make arrangements to conceal it.
Amount of penalty: standard amount
6     (1)
The penalty payable under any of paragraphs 1, 2, 3(1) and 4 is—
(a)
for a deliberate and concealed act or failure, 100% of the potential lost
revenue,
(b)
for a deliberate but not concealed act or failure, 70% of the potential
lost revenue, and
(c)
for any other case, 30% of the potential lost revenue.
      (2)
The penalty payable under paragraph 3(2) is 100% of the potential lost
revenue.
      (3)
Paragraphs 7 to 11 define “the potential lost revenue”.

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Potential lost revenue
7     (1)
“The potential lost revenue” in respect of a failure to comply with a relevant
obligation is as follows.
      (2)
In the case of a relevant obligation relating to income tax or capital gains tax
and a tax year, the potential lost revenue is so much of any income tax or
capital gains tax to which P is liable in respect of the tax year as by reason of
the failure is unpaid on 31 January following the tax year.
      (3)
In the case of a relevant obligation relating to corporation tax and an
accounting period, the potential lost revenue is (subject to sub-paragraph
(4)) so much of any corporation tax to which P is liable in respect of the
accounting period as by reason of the failure is unpaid 12 months after the
end of the accounting period.
      (4)
In computing the amount of that tax no account shall be taken of any relief
under subsection (4) of section 419 of ICTA (relief in respect of repayment
etc of loan) which is deferred under subsection (4A) of that section.
      (5)
In any case where the failure is a failure to comply with the obligation under
paragraph 2(4) of Schedule 11 to VATA 1994, the potential lost revenue is the
value added tax on the acquisition to which the failure relates.
      (6)
In the case of any other relevant obligation relating to value added tax, the
potential lost revenue is the amount of the value added tax (if any) for which
P is, or but for any exemption from registration would be, liable for the
relevant period (see sub-paragraph (7)), but subject to sub-paragraph (8).
      (7)
“The relevant period” is—
(a)
in relation to a failure to comply with paragraph 14(2) or (3) of
Schedule 1 to VATA 1994, paragraph 8(2) of Schedule 3 to that Act or
paragraph 7(2) or (3) of Schedule 3A to that Act, the period beginning
on the date of the change or alteration concerned and ending on the
date on which HMRC received notification of, or otherwise became
fully aware of, that change or alteration, and
(b)
in relation to a failure to comply with an obligation under any other
provision, the period beginning on the date with effect from which P
is required in accordance with that provision to be registered and
ending on the date on which HMRC received notification of, or
otherwise became fully aware of, P’s liability to be registered.
      (8)
But the amount mentioned in sub-paragraph (6) is reduced—
(a)
if the amount of the tax mentioned in that sub-paragraph includes
tax on an acquisition of goods from another member State, by the
amount of any VAT which HMRC are satisfied has been paid on the
supply in pursuance of which the goods were acquired under the
law of that member State, and
(b)
if the amount of that tax includes tax chargeable by virtue of section
7(4) of VATA 1994 on a supply, by the amount of any VAT which
HMRC are satisfied has been paid on that supply under the law of
another member State.
      (9)
In the case of a relevant obligation under any provision relating to insurance
premium tax, aggregates levy, climate change levy, landfill tax or air
passenger duty, the potential lost revenue is the amount of the tax (if any)
for which P is liable for the period—

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(a)
beginning on the date with effect from which P is required in
accordance with that provision to be registered, and
(b)
ending on the date on which HMRC received notification of, or
otherwise became fully aware of, P’s liability to be registered.
     (10)
In the case of a failure to comply with a relevant obligation relating to any
other tax, the potential lost revenue is the amount of any tax which is unpaid
by reason of the failure.
8
In the case of the making of an unauthorised issue of an invoice showing
VAT, the potential lost revenue is the amount shown on the invoice as value
added tax or the amount to be taken as representing value added tax.
9
In the case of—
(a)
the doing of an act which enables HMRC to assess an amount of duty
as due under a relevant excise provision, or
(b)
supplying a product knowing that it will be used in a way which
enables HMRC to assess an amount as duty due from another person
under a relevant excise provision,

the potential lost revenue is the amount of the duty which may be assessed
as due.
10
In the case of acquiring possession of, or being concerned in dealing with,
goods the payment of duty on which is outstanding and has not been
deferred, the potential lost revenue is an amount equal to the amount of duty
due on the goods.
11    (1)
In calculating potential lost revenue in respect of a relevant act or failure on
the part of P no account is to 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).
      (2)
In this Schedule “a relevant act or failure” means—
(a)
a failure to comply with a relevant obligation,
(b)
the making of an unauthorised issue of an invoice showing VAT,
(c)
the doing of an act which enables HMRC to assess an amount of duty
as due under a relevant excise provision or supplying a product
knowing that it will be used in a way which enables HMRC to assess
an amount as duty due from another person under a relevant excise
provision, or
(d)
acquiring possession of, or being concerned in dealing with, goods
the payment of duty on which is outstanding and has not been
deferred.
Reductions for disclosure
12    (1)
Paragraph 13 provides for reductions in penalties under paragraphs 1 to 4
where P discloses a relevant act or failure
      (2)
P discloses a relevant act or failure by—
(a)
telling HMRC about it,
(b)
giving HMRC reasonable help in quantifying the tax unpaid by
reason of it, and
(c)
allowing HMRC access to records for the purpose of checking how
much tax is so unpaid.

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      (3)
Disclosure of a relevant act or failure—
(a)
is “unprompted” if made at a time when the person making it has no
reason to believe that HMRC have discovered or are about to
discover the relevant act or failure, and
(b)
otherwise, is “prompted”.
      (4)
In relation to disclosure “quality” includes timing, nature and extent.
13    (1)
Where a person who would otherwise be liable to a 100% penalty has made
an unprompted disclosure, HMRC shall reduce the 100% to a percentage,
not below 30%, which reflects the quality of the disclosure.
      (2)
Where a person who would otherwise be liable to a 100% penalty has made
a prompted disclosure, HMRC shall reduce the 100% to a percentage, not
below 50%, which reflects the quality of the disclosure.
      (3)
Where a person who would otherwise be liable to a 70% penalty has made
an unprompted disclosure, HMRC shall reduce the 70% to a percentage, not
below 20%, which reflects the quality of the disclosure.
      (4)
Where a person who would otherwise be liable to a 70% penalty has made a
prompted disclosure, HMRC shall reduce the 70% to a percentage, not
below 35%, which reflects the quality of the disclosure.
      (5)
Where a person who would otherwise be liable to a 30% penalty has made
an unprompted disclosure, HMRC shall reduce the 30%—
(a)
if the penalty is under paragraph 1 and HMRC become aware of the
failure less than 12 months after the time when tax first becomes
unpaid by reason of the failure, to a percentage (which may be 0%),
or
(b)
in any other case, to a percentage not below 10%,

which reflects the quality of the disclosure.
      (6)
Where a person who would otherwise be liable to a 30% penalty has made a
prompted disclosure, HMRC shall reduce the 30% —
(a)
if the penalty is under paragraph 1 and HMRC become aware of the
failure less than 12 months after the time when tax first becomes
unpaid by reason of the failure, to a percentage not below 10%, or
(b)
in any other case, to a percentage not below 20%,

which reflects the quality of the disclosure.
Special reduction
14    (1)
If HMRC think it right because of special circumstances, they may reduce a
penalty under any of paragraphs 1 to 4.
      (2)
In 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
to—
(a)
staying a penalty, and
(b)
agreeing a compromise in relation to proceedings for a penalty.