HMRC Updates Fact Sheet on ‘ FAILURE TO NOTIFY’

HMRC has the power to charge employers a penalty if they fail to notify them of changes that alter their tax position.

As this is key in relation to COVID-19 support, what do you need to know to avoid trouble?

๐—ช๐—ต๐—ฒ๐—ป ๐—ฑ๐—ผ ๐˜†๐—ผ๐˜‚ ๐—ต๐—ฎ๐˜ƒ๐—ฒ ๐˜๐—ผ ๐—ป๐—ผ๐˜๐—ถ๐—ณ๐˜† ๐—›๐— ๐—ฅ๐—–?

Certain things that happen in the life of a business affect its tax liability. As a result, there is a requirement to inform HMRC within certain time limits. Ignoring this can lead to a potential โ€œfailure to notifyโ€ penalty.

For example, when a business exceeds the VAT registration threshold it has 30 days to inform HMRC. In the context of COVID-19, failing to notify HMRC within 90 days of discovering a mistake in your Coronavirus Job Retention Scheme claim is classed as a potential penalty situation. HMRC has recently updated its fact sheet on failure to notify.

๐—ฅ๐—ฒ๐—ฎ๐˜€๐—ผ๐—ป๐—ฎ๐—ฏ๐—น๐—ฒ ๐—ฒ๐˜…๐—ฐ๐˜‚๐˜€๐—ฒ

HMRC wonโ€™t charge a penalty for failure to notify if all of the following conditions are met:

โžก๏ธyou have a reasonable excuse,

โžก๏ธ the failure wasnโ€™t deliberate and

โžก๏ธas soon as the reasonable excuse ends you tell HMRC what has happened.

But what is a reasonable excuse?

Itโ€™s where something happened outside your control. Or even a combination of events. And itโ€™s very personal as the loss through illness of a key person in a small business could be very different to that of a member of staff in a large team.

๐——๐—ผ๐—ปโ€™๐˜ ๐˜„๐—ฎ๐—ถ๐˜ ๐—ณ๐—ผ๐—ฟ ๐—›๐— ๐—ฅ๐—–

If you find there is an issue that should have been notified to HMRC, and youโ€™ve missed a deadline, you should always make what is known as an โ€œunprompted disclosureโ€.

Once HMRC has started a compliance check itโ€™s much more difficult to make an unprompted disclosure. The fact that the check has started is in itself a prompt. So youโ€™ll only get the lower penalty that can be offered for unprompted disclosures if what youโ€™re telling HMRC is unrelated to the issue it is investigating. Or it was highly unlikely to find the issue during the current compliance check.

๐—ง๐—ฒ๐—น๐—น๐—ถ๐—ป๐—ด, ๐—ต๐—ฒ๐—น๐—ฝ๐—ถ๐—ป๐—ด ๐—ฎ๐—ป๐—ฑ ๐—ด๐—ถ๐˜ƒ๐—ถ๐—ป๐—ด

What you do after you have made the disclosure also has an impact, and this is what HMRC refers to as the โ€œquality of the disclosureโ€.

The more you co-operate with HMRC, the more the penalty can be reduced. You can co-operate by: telling HMRC everything about why the failure occurred and answering its questions; replying quickly and explaining the information youโ€™re supplying; and giving it access to any requested documents promptly.


The higher the quality of the initial disclosure the more likely it is that youโ€™ll get an immediate full penalty reduction. It can therefore be worth engaging an advisor who specializes in disclosures.

#business #smallbusiness #tax #covid #hmrc

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Published On: November 20th, 2021 / Categories: Knowledge / Tags: , , /