Finance Bill

House of Commons

Session 2007 - 08
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill (Volume II)
Schedule 41 — Penalties: failure to notify and certain VAT and excise wrongdoing
434

Interaction with other penalties and late payment surcharges
15    (1)
The amount of a penalty for which P is liable under any of paragraphs 1 to 4
shall be reduced by the amount of any other penalty incurred by P, or any
surcharge for late payment of tax imposed on P, if the amount of the penalty
or surcharge is determined by reference to the same tax liability.
      (2)
If P is liable to a penalty under section 9 of FA 1994 in respect of a failure to
comply with a relevant obligation, the amount of any penalty payable under
paragraph 1 in respect of the failure is to be reduced by the amount of the
penalty under that section.
      (3)
Where penalties are imposed under paragraph 3(1) and (2) in respect of the
same act or use, the aggregate of the amounts of the penalties must not
exceed 100% of the potential lost revenue.
Assessment
16    (1)
Where P becomes liable for a penalty under any of paragraphs 1 to 4 HMRC
shall—
(a)
assess the penalty,
(b)
notify P, and
(c)
state in the notice the period in respect of which the penalty is
assessed.
      (2)
A penalty under any of paragraphs 1 to 4 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)
shall 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 Act),
(b)
may be enforced as if it were an assessment to tax, and
(c)
may be combined with an assessment to tax.
      (4)
An assessment of a penalty under any of paragraphs 1 to 4 must be made
before the end of the period of 12 months beginning with—
(a)
the end of the appeal period for the assessment of tax unpaid by
reason of the relevant act or failure in respect of which the penalty is
imposed, or
(b)
if there is no such assessment, the date on which the amount of tax
unpaid by reason of the relevant act or failure is ascertained.
      (5)
In sub-paragraph (4)(a) “appeal period” means the period during which—
(a)
an appeal could be brought, or
(b)
an appeal that has been brought has not been determined or
withdrawn.
      (6)
Subject to sub-paragraph (4), a supplementary assessment may be made in
respect of a penalty if an earlier assessment operated by reference to an
underestimate of potential lost revenue.
      (7)
The references in this paragraph to “an assessment to tax” are, in relation to
a penalty under paragraph 2, a demand for recovery.

Finance Bill (Volume II)
Schedule 41 — Penalties: failure to notify and certain VAT and excise wrongdoing
435

Appeal
17    (1)
P may appeal against a decision of HMRC that a penalty is payable by P.
      (2)
P may appeal against a decision of HMRC as to the amount of a penalty
payable by P.
18    (1)
An appeal is to be brought to the First-tier tribunal.
      (2)
An appeal shall be treated for procedural purposes in the same way as an
appeal against an assessment to the tax concerned (except in respect of a
matter expressly provided for by this Act).
19    (1)
On an appeal under paragraph 17(1) the First-tier tribunal may affirm or
cancel HMRC’s decision.
      (2)
On an appeal under paragraph 17(2) the First-tier Tribunal may—
(a)
affirm HMRC’s decision, or
(b)
substitute for HMRC’s decision another decision that HMRC had
power to make.
      (3)
If the First-tier tribunal substitutes its decision for HMRC’s, the tribunal may
rely on paragraph 14—
(a)
to 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 14 was flawed.
      (4)
In sub-paragraph (3)(b) “flawed” means flawed when considered in the light
of the principles applicable in proceedings for judicial review.
Reasonable excuse
20    (1)
Liability to a penalty under any of paragraphs 1, 2, 3(1) and 4 does not arise
in relation to an act or failure which is not deliberate if P satisfies HMRC or
(on appeal) the First-tier Tribunal that there is a reasonable excuse for the act
or failure.
      (2)
For the purposes of sub-paragraph (1)—
(a)
an insufficiency of funds is not a reasonable excuse unless
attributable to events outside P’s control,
(b)
where P relies on any other person to do anything, that is not a
reasonable excuse unless P took reasonable care to avoid the relevant
act or failure, and
(c)
where P had a reasonable excuse for the relevant act or failure but the
excuse has ceased, P is to be treated as having continued to have the
excuse if the relevant act or failure is remedied without unreasonable
delay after the excuse ceased.
Agency
21    (1)
In paragraph 1 the reference to a failure by P includes a failure by a person
who acts on P’s behalf; but P is not liable to a penalty in respect of any failure
by P’s agent where P satisfies HMRC or (on appeal) the First-tier Tribunal
that P took reasonable care to avoid the failure.

Finance Bill (Volume II)
Schedule 41 — Penalties: failure to notify and certain VAT and excise wrongdoing
436

      (2)
In paragraph 2 the reference to the making by P of an unauthorised issue of
an invoice showing VAT includes the making of such an unauthorised issue
by a person who acts on P’s behalf; but P is not liable to a penalty in respect
of any action by P’s agent where P satisfies HMRC or (on appeal) the First-
tier Tribunal that P took reasonable care to avoid it.
      (3)
In paragraph 3(1) the reference to the doing by P of an act which enables
HMRC to assess an amount as duty due from P under a relevant excise
provision includes the doing of such an act by a person who acts on P’s
behalf; but P is not liable to a penalty in respect of any action by P’s agent
where P satisfies HMRC or (on appeal) the First-tier Tribunal that P took
reasonable care to avoid it.
      (4)
In paragraph 4 the reference to P acquiring possession of, or being concerned
in dealing with, goods the payment of duty on which is outstanding and has
not been deferred includes a person who acts on P’s behalf doing so; but P
is not liable to a penalty in respect of any action by P’s agent where P satisfies
HMRC or (on appeal) the First-tier Tribunal that P took reasonable care to
avoid it.
Companies: officers’ liability
22    (1)
Where a penalty under any of paragraphs 1, 2, 3(1) and 4 is payable by a
company for a deliberate act or failure which was attributable to an officer
of the company, the officer is liable to pay such portion of the penalty (which
may be 100%) as HMRC may specify by written notice to the officer.
      (2)
Sub-paragraph (1) does not allow HMRC to recover more than 100% of a
penalty.
      (3)
In the application of sub-paragraph (1) to a body corporate “officer”
means—
(a)
a director (including a shadow director within the meaning of
section 251 of the Companies Act 2006 (c. 46)), or
(b)
a secretary.
      (4)
In the application of sub-paragraph (1) in any other case “officer” means—
(a)
a director,
(b)
a manager,
(c)
a secretary, and
(d)
any other person managing or purporting to manage any of the
company’s affairs.
      (5)
Where HMRC have specified a portion of a penalty in a notice given to an
officer under sub-paragraph (1)—
(a)
paragraph 14 applies to the specified portion as to a penalty,
(b)
the officer must pay the specified portion before the end of the period
of 30 days beginning with the day on which the notice is given,
(c)
paragraph 16(3) to (5) and (7) apply as if the notice were an
assessment of a penalty,
(d)
a further notice may be given in respect of a portion of any additional
amount assessed in a supplementary assessment in respect of the
penalty under paragraph 16(6),
(e)
paragraphs 17 to 19 apply as if HMRC had decided that a penalty of
the amount of the specified portion is payable by the officer, and

Finance Bill (Volume II)
Schedule 41 — Penalties: failure to notify and certain VAT and excise wrongdoing
437

(f)
paragraph 23 applies as if the officer were liable to a penalty.
Double jeopardy
23
P is not liable to a penalty under any of paragraphs 1 to 4 in respect of a
failure or action in respect of which P has been convicted of an offence.
Interpretation
24    (1)
This paragraph applies for the construction of this Schedule
      (2)
“HMRC” means Her Majesty’s Revenue and Customs.
      (3)
“Tax”, without more, includes duty.
      (4)
An expression used in relation to value added tax has the same meaning as
in VATA 1994.
Consequential repeals
25
In consequence of this Schedule the following provisions are omitted—
(a)
in TMA 1970—
(i)
section 7(8), and
(ii)
in the table in section 98, in the second column, the entry
relating to section 55 of FA 2004,
(b)
section 170A of CEMA 1979,
(c)
in ALDA 1979—
(i)
in section 47(5), “which shall be calculated by reference to the
amount of duty charged on the beer produced”,
(ii)
in section 54(5), “which shall be calculated by reference to the
amount of duty charged on the wine produced”,
(iii)
in section 55(6), “which shall be calculated by reference to the
amount of duty charged on the made-wine produced”, and
(iv)
in section 62(4), “which shall be calculated by reference to the
amount of duty charged on the cider made”,
(d)
in HODA 1979—
(i)
section 13AD(4)(a) and (b), and
(ii)
section 14F(4)(a) and (b),
(e)
in FA 1994—
(i)
section 33(6),
(ii)
paragraph 13 of Schedule 4, and
(iii)
paragraph 14 of Schedule 7,
(f)
section 67 of VATA 1994,
(g)
section 32 of FA 1995,
(h)
in FA 1996—
(i)
section 37, and
(ii)
paragraph 21(1), (2) and (4) of Schedule 5,
(i)
section 27(11) of FA 1997,
(j)
paragraph 2(3) and (4) of Schedule 18 to FA 1998,
(k)
in FA 2000—
(i)
section 136(2), and
(ii)
paragraph 55(2) to (6) of Schedule 6, and

Finance Bill (Volume II)
Schedule 42 — Alcoholic liquor duties: decisions subject to review and appeal
438

(l)
paragraph 1(2) to (6) of Schedule 4 to FA 2001.
Schedule 42
Section 123

Alcoholic liquor duties: decisions subject to review and appeal
1
Schedule 5 to FA 1994 (customs and excise decisions subject to review and
appeal) is amended as follows.
2     (1)
Sub-paragraph (1) of paragraph 3 (decisions under or for the purposes of
ALDA 1979) is amended as follows.
      (2)
After paragraph (h) insert—
“(ha)
any decision as to whether or not drawback is to be allowed
under section 22 (drawback on British compounds and spirits
of wine) or the amount of drawback to be allowed under that
section;”.
      (3)
After paragraph (k) insert—
“(ka)
any decision by the Commissioners as to whether or not to
remit or repay duty under section 46 of the Alcoholic Liquor
Duties Act 1979 (remission or repayment of duty on spoilt
beer) or the amount of duty to be so remitted or repaid;”.
      (4)
After paragraph (m) insert—
“(ma)
any decision by the Commissioners as to whether or not to
remit or repay duty under section 61 of the Alcoholic Liquor
Duties Act 1979 (remission or repayment of duty on spoilt
wine or made-wine) or the amount of duty to be so remitted
or repaid;
(mb)
any decision by the Commissioners as to whether or not to
remit or repay duty under section 64 of the Alcoholic Liquor
Duties Act 1979 (remission or repayment of duty on spoilt
cider) or the amount of duty to be so remitted or repaid;”.
3     (1)
Sub-paragraph (2) of paragraph 3 (decisions under regulations under
section 13 or 77 of ALDA 1979) is amended as follows.
      (2)
After “a decision” insert “—
(a)
”.
      (3)
Insert at the end “; or
(b)
as to whether or not a person is to be required to give
security for the fulfilment of an obligation or as to the form
or amount of, or the conditions of, any such security.”
4
After sub-paragraph (2) of paragraph 3 insert—
   “(2A)
Any decision which is made under or for the purposes of any
regulations under section 15 of the Alcoholic Liquor Duties Act
1979 (distillers’ warehouses) and is a decision as to whether or not
a person is to be required to give security for the fulfilment of an
obligation or as to the form or amount of, or the conditions of, any
such security.

Finance Bill (Volume II)
Schedule 42 — Alcoholic liquor duties: decisions subject to review and appeal
439

     (2B)
Any decision which is made under or for the purposes of section
41A or 47, or any regulations under section 49, of the Alcoholic
Liquor Duties Act 1979 (regulation of the making of beer) and is a
decision—
(a)
as to whether or not to register a person or premises under
section 41A or 47;
(b)
as to the conditions subject to which a person is, or
premises are, so registered;
(c)
as to the revocation of such a registration;
(d)
as to whether or not a person is to be required to give
security for the fulfilment of an obligation or as to the form
or amount of, or the conditions of, any such security; or
(e)
as to whether or not to restrict or prohibit the movement of
beer from one place to another without payment of duty.”
5     (1)
Sub-paragraph (3) of paragraph 3 (decisions under section 55, and
regulations under section 56, of ALDA 1979) is amended as follows.
      (2)
For “section 55” substitute “section 54 or 55”.
      (3)
After “a decision” insert “—
(a)
”.
      (4)
For “that section” substitute “section 54 or 55”.
      (5)
Insert at the end—
“(b)
as to whether or not a person is to be required to give
security for the fulfilment of an obligation or as to the form
or amount of, or the conditions of, any such security; or
(c)
as to the conditions subject to which, or the purposes for
which, wine or made-wine may be moved from one place
to another without payment of duty.”
6
After sub-paragraph (3) of paragraph 3 insert—
   “(3A)
Any decision which is made under or for the purposes of section
62 of the Alcoholic Liquor Duties Act 1979 (regulation of the
making of cider), or any regulations under that section, and is a
decision—
(a)
as to whether or not to register, or to cancel the registration
of, a maker of cider;
(b)
as to whether or not a person is to be required to give
security for the fulfilment of an obligation or as to the form
or amount of, or the conditions of, any such security; or
(c)
as to the conditions subject to which, or the purposes for
which, cider may be moved from one place to another
without payment of duty.”
7
After paragraph 9 insert—
“The Finance Act 1995
9ZA
Any decision by the Commissioners—
(a)
on a claim under section 4 of the Finance Act 1995 for
repayment of duty (alcoholic ingredients relief); or
(b)
as to whether or not to remit duty under that section.”