Finance Act 2021

(5) Where the qualifying expenditure described in subsection (4)(b) consists of or includes freeport qualifying expenditure (as defined in section 270BNA), a statement is not an allowance statement unless it states the amount of the freeport qualifying expenditure.

PART 3 — Related amendments

TMA 1970

13

In section 98 of TMA 1970 (penalty for failure to provide information etc), in the second column of the Table, in the entry relating to CAA 2001, after “45G(4) and (5),” insert “ 45R(5) and (6), ”.

CAA 2001

14

CAA 2001 is amended as follows.

15

• (1) Section 3 (claims for capital allowances) is amended as follows.

• (2) After subsection (2) insert—

(2ZZA) Any claim for a first-year allowance under section 45O (expenditure on plant and machinery for use in freeport tax sites) must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.

• (3) In subsection (2ZA)—

• (a) after “allowances)” insert

— (a)

, and

• (b) at the end insert

, and (b) where it relates to freeport qualifying expenditure (as defined in section 270BNA), must include, or be accompanied by, such information as Her Majesty's Revenue and Customs may require.

16

• (1) Section 570B (orders and regulations) is amended as follows.

• (2) In subsection (3), for “70YJ” substitute “ 45P, 70YJ or 270BNC ”.

• (3) After that subsection insert—

(4) An instrument containing regulations under section 45P or 270BNC must be laid before the House of Commons after being made. (5) If the regulations are not approved by the House of Commons before the end of the period of 28 days beginning with the day on which they are made, they cease to have effect at the end of that period (if they have not already ceased to have effect under subsection (6)). (6) If, on any day during that period of 28 days, the House of Commons, in proceedings on a motion that (or to the effect that) the regulations be approved, comes to a decision rejecting the regulations, they shall cease to have effect at the end of that day. (7) In reckoning any such period of 28 days, no account is to be taken of any time during which— (a) Parliament is prorogued or dissolved, or (b) the House of Commons is adjourned for more than four days. (8) Where regulations cease to have effect under subsection (6), their ceasing to have effect is without prejudice to anything done in reliance on them.

17

After section 573 insert—

(573A) In this Act, “freeport tax site” means an area for the time being designated under section 113 of the Finance Act 2021.

18

In Part 2 of Schedule 1 to CAA 2001 (defined expressions), at the appropriate place insert—

freeport tax site	section 573A

.

SCHEDULE 23

1

Part 4 of FA 2003 (stamp duty land tax) is amended as follows.

2

After section 61 insert—

(61A) (1) Schedule 6C provides for relief in the case of transactions relating to land in a freeport tax site. (2) In that Schedule— (a) Part 1 contains definitions, (b) Part 2 makes provision about the relief, (c) Part 3 makes provision about the withdrawal of the relief, (d) Part 4 makes provision about cases involving alternative finance arrangements, and (e) Part 5 confers power to change the cases in which the relief is available. (3) Relief under that Schedule is available only in relation to a land transaction with an effective date falling on or before 30 September 2026. (4) Any relief under that Schedule must be claimed in a land transaction return or an amendment of such a return. (5) A claim for relief under that Schedule must— (a) be made on or before 14 October 2027, and (b) include, or be accompanied by, such information as HMRC may require. (6) In this section and Schedule 6C, “freeport tax site” means an area for the time being designated under section 113 of the Finance Act 2021.

3

In section 81 (further return where relief withdrawn)—

• (a) in subsection (1A) (as substituted by Schedule 17 to this Act), after paragraph (a) insert—

(aa) Part 3 of Schedule 6C (relief for freeport tax sites), other than in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies,

,

• (b) in subsection (1B), after paragraph (ea) (inserted by Schedule 17 to this Act) insert—

(eb) in the case of relief under Schedule 6C (relief for freeport tax sites), the last day in the control period on which the qualifying freeport land is used exclusively in a qualifying manner;

, and

• (c) after subsection (4) insert—

(4A) Terms used in paragraph (eb) of subsection (1B) which are defined for the purposes of Schedule 6C have the same meaning in that paragraph as they have in that Schedule. (4B) Paragraph 10 of Schedule 6C applies for the purposes of subsection (1B)(eb) as it applies for the purposes of paragraph 8 of that Schedule.

4

In section 81ZA (alternative finance arrangements: return where relief withdrawn)—

• (a) in subsection (1), after “arrangements)” insert “ or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies ”,

• (b) in subsection (3) (as substituted by Schedule 17 to this Act), at the end insert—

(c) where the relief was given under Part 2 of Schedule 6C, the last day in the control period on which the qualifying freeport land is used exclusively in a qualifying manner.

, and

• (c) after subsection (6) insert—

(6A) Terms used in paragraph (c) of subsection (3) which are defined for the purposes of Schedule 6C have the same meaning in that paragraph as they have in that Schedule (as modified by paragraph 11 of that Schedule). (6B) Paragraph 10 of Schedule 6C (as modified by paragraph 11 of that Schedule) applies for the purposes of subsection (3)(c) as it applies for the purposes of paragraph 8 of that Schedule.

5

In section 85(3) (liability for tax), after “arrangements)” insert “ or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies ”.”

6

In section 86 (payment of tax)—

• (a) in subsection (2), after paragraph (za) insert—

(zb) Part 3 of Schedule 6C (relief for freeport tax sites), other than in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies,

, and

• (b) in subsection (2A), after “arrangements)” insert “ or under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies ”.

7

In section 87(3) (interest on unpaid tax), after paragraph (aza) insert—

(azaa) in the case of an amount payable because relief is withdrawn under Part 3 of Schedule 6C (relief for freeport tax sites), other than in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies, the date which is the relevant date for the purposes of section 81(1A); (azab) in the case of an amount payable because relief is withdrawn under Part 3 of Schedule 6C (relief for freeport tax sites) in a case to which paragraph 11 of that Schedule (alternative finance arrangements) applies, the date which is the date of the disqualifying event for the purposes of section 81ZA (see subsection (3) of that section);

.

8

After Schedule 6B insert—

SCHEDULE 6C (1) In this Schedule, “transaction land”, in relation to a land transaction, means land a chargeable interest in which is the subject matter of the transaction. (2) For the purposes of this Schedule, transaction land is “qualifying freeport land” if, on the effective date of the transaction— (a) it is situated in a freeport tax site, and (b) the purchaser intends it to be used exclusively in a qualifying manner. (3) (1) For the purposes of this Schedule, transaction land is used in a qualifying manner if— (a) it is used by the purchaser or a connected person in the course of a commercial trade or profession, (b) it is developed or redeveloped by the purchaser or a connected person for use (by any person) in the course of a commercial trade or profession, (c) it is exploited by the purchaser or a connected person, in the course of a commercial trade or profession, as a source of rents or other receipts (other than excluded rents), or (d) it is used in two or more of the ways described in paragraphs (a) to (c). (2) But land is not used in a qualifying manner to the extent that it is— (a) used as a dwelling or as the garden or grounds of a dwelling, (b) developed or redeveloped to become residential property, (c) exploited as a source of rents or other receipts payable by a person using the land as a dwelling or as the garden or grounds of a dwelling, or (d) held (as stock of the business) for resale without development or redevelopment. (3) For the purposes of this paragraph, use of land in the course of a commercial trade or profession includes use of land for a purpose that is ancillary to the use of other land which— (a) is situated in a freeport tax site, and (b) is being used, or developed or redeveloped, in the course of a commercial trade or profession. (4) The references in sub-paragraph (2) to land used as the garden or grounds of a dwelling include a building or structure on the land. (5) The references in this paragraph to doing something in the course of a commercial trade or profession include doing something in the course of a property rental business. (6) In this paragraph— - “commercial”, in relation to a trade or profession, means carried on— 1. on a commercial basis, and 2. with a view to profit; - “excluded rents” has the same meaning as in section 133 of the Finance Act 2013; - “property rental business” means a property business as defined in Chapter 2 of Part 3 of the Income Tax (Trading and Other Income) Act 2005. (4) (1) In this Schedule, “connected person” means a person who is connected with the purchaser. (2) Section 1122 of the Corporation Tax Act 2010 (connected persons) has effect for the purposes of this paragraph. (5) (1) This paragraph applies to a land transaction if at least 90% of the chargeable consideration for the transaction is attributable to qualifying freeport land. (2) The transaction is exempt from charge. (6) (1) This paragraph applies to a land transaction if the proportion of the chargeable consideration for the transaction that is attributable to qualifying freeport land (“the relevant proportion”) is less than 90% but at least 10%. (2) The tax chargeable in respect of the transaction is reduced by the relevant proportion. (7) (1) For the purposes of this Schedule, the consideration attributable to qualifying freeport land must be determined on a just and reasonable basis. (2) Sub-paragraphs (3) and (4) apply if less than 100% of the chargeable consideration attributable to transaction land situated in a freeport tax site (“the freeport consideration”) is attributable to land that satisfies the condition in paragraph 2(b). (3) If at least 90% of the freeport consideration is attributable to land that satisfies the condition in paragraph 2(b) then, for the purposes of this Schedule, all of the freeport consideration is to be treated as being attributable to qualifying freeport land. (4) If less than 10% of the freeport consideration is attributable to land that satisfies the condition in paragraph 2(b) then, for the purposes of this Schedule, all of the freeport consideration is to be treated as not being attributable to qualifying freeport land. (8) (1) This paragraph applies where relief under Part 2 of this Schedule has been allowed in respect of a land transaction. (2) The relief is withdrawn if, at any time during the control period, the qualifying freeport land is not used exclusively in a qualifying manner. (3) But the relief is not withdrawn where, because of a change in circumstances that is unforeseen and beyond the purchaser's control, it is not reasonable to expect the qualifying freeport land to be used exclusively in a qualifying manner at that time. (4) Where, at a time during the control period, the use of all or part of the qualifying freeport land in a qualifying manner has not yet begun, that land, or that part of the land, is to be treated as being used exclusively in a qualifying manner if reasonable steps are being taken to ensure that it is used in that manner. (5) Where, at a time during the control period, the use of all or part of the qualifying freeport land in a qualifying manner has ceased, that land, or that part of the land, is to be treated as being used exclusively in a qualifying manner if reasonable steps are being taken— (a) to ensure that it is used in that manner, or (b) to dispose of all chargeable interests in that land, or that part of the land, that are held by the purchaser and connected persons in a timely manner. (9) (1) In this Schedule, “the control period”, in relation to a land transaction, means the shorter of— (a) the period of three years beginning with the effective date of that transaction, and (b) the period beginning with the effective date of that transaction and ending with the effective date of the final transaction. (2) For the purposes of this paragraph, a land transaction is “the final transaction” if, immediately after the effective date of the transaction, neither the purchaser nor a connected person holds a chargeable interest in the qualifying freeport land (whether as a result of that transaction alone or as a result of that transaction and other land transactions). (10) (1) This paragraph applies where the purchaser ceases to hold a chargeable interest in part of the qualifying freeport land during the control period. (2) The references in paragraphs 8 and 9 to the qualifying freeport land are to be treated as references only to the part of the qualifying freeport land in relation to which the purchaser still holds a chargeable interest (whether the chargeable interest acquired in the land transaction in respect of which relief was allowed under Part 2 of this Schedule or another chargeable interest). (11) (1) This paragraph applies where either of the following applies— (a) section 71A (land sold to financial institution and leased to person), or (b) section 73 (land sold to financial institution and re-sold to person). (2) This paragraph applies for the purposes of determining— (a) whether relief is available under Part 2 of this Schedule for the first transaction, and (b) whether relief allowed for the first transaction is withdrawn under Part 3 of this Schedule. (3) For those purposes this Schedule has effect as if— (a) references to the purchaser were references to the relevant person, and (b) the reference in paragraph 3(2)(d) to land held (as stock of the business) for resale without development or redevelopment were a reference to land held in that manner by the relevant person. (4) The first transaction does not qualify for relief under Part 2 of this Schedule except where it does so by virtue of this paragraph. (5) In this paragraph— - “the first transaction” has the same meaning as in section 71A or 73 (as appropriate); - “the relevant person” means the person, other than the financial institution, who entered into the arrangements mentioned in section 71A(1) or 73(1) (as appropriate). (12) (1) The Treasury may by regulations— (a) amend the meaning of “qualifying freeport land”, (b) add other conditions that must be met in order for relief to be available under this Schedule, and (c) amend or remove conditions added under paragraph (b). (2) Regulations under this paragraph may not remove the requirement for land to be situated in a freeport tax site. (3) Regulations under this paragraph may, among other things— (a) make provision by reference to the land, the land transaction, the purchaser or connected persons; (b) impose conditions relating to accounts or other records; (c) impose other conditions requiring a person to take steps specified in the regulations. (4) Regulations under this paragraph— (a) may amend, repeal or otherwise modify provisions of this Schedule, and (b) where made in reliance on section 114(6)(c), may amend, repeal or otherwise modify other provisions of this Act. (13) (1) An instrument containing regulations under paragraph 12 must be laid before the House of Commons after being made. (2) If the regulations are not approved by the House of Commons before the end of the period of 28 days beginning with the day on which they are made, they cease to have effect at the end of that period (if they have not already ceased to have effect under sub-paragraph (3)). (3) If, on any day during that period of 28 days, the House of Commons, in proceedings on a motion that (or to the effect that) the regulations be approved, comes to a decision rejecting the regulations, they shall cease to have effect at the end of that day. (4) In reckoning any such period of 28 days, no account is to be taken of any time during which— (a) Parliament is prorogued or dissolved, or (b) the House of Commons is adjourned for more than four days. (5) Where regulations cease to have effect under sub-paragraph (3), their ceasing to have effect is without prejudice to anything done in reliance on them.

SCHEDULE 24

PART 1 — Introduction

Introduction

1

• (1) This Schedule provides for a person who fails to make a return to be liable to penalty points and penalties.

• (2) This Part of this Schedule—

• (a) identifies groups of returns, and the returns falling within each group, and

• (b) makes provision about the interpretation of this Schedule.

• (3) Part 2 of this Schedule provides for a person to be liable to penalty points, and penalties, in respect of each group of returns.

• (4) Part 3 of this Schedule makes supplementary provision.

Returns

2

• (1) The Table identifies, for each item listed in column 1 of the Table, one or more groups of returns (according to the frequency with which returns are required to be made).

Item	Tax	Groups of returns	Groups of returns	Groups of returns
		Column A (groups of annual etc returns)	Column B (groups of quarterly etc returns)	Column C (groups of monthly etc returns)
1	Income tax or capital gains tax (persons other than trustees or partnerships)	This group applies where there is no requirement to provide information under regulations under paragraph 7 of Schedule A1 to TMA 1970.Return under section 8 of TMA 1970Accounts, statement or document required under section 8(1AB)(b) of TMA 1970	This group applies where there is a requirement to provide information under regulations under paragraph 7 of Schedule A1 to TMA 1970.Return under section 8 of TMA 1970Accounts, statement or document required under section 8(1AB)(b) of TMA 1970Statement under regulations under paragraph 8 of Schedule A1 to TMA 1970Information required to be provided under regulations under paragraph 7 of Schedule A1 to TMA 1970	-
2	Income tax or capital gains tax (trustees)	This group applies where there is no requirement to provide information under regulations under paragraph 7 of Schedule A1 to TMA 1970.Return under section 8A of TMA 1970Accounts, statement or document required under section 8A(1AB)(b) of TMA 1970	This group applies where there is a requirement to provide information under regulations under paragraph 7 of Schedule A1 to TMA 1970.Return under section 8A of TMA 1970Accounts, statement or document required under section 8A(1AB)(b) of TMA 1970Statement under regulations under paragraph 8 of Schedule A1 to TMA 1970Information required to be provided under regulations under paragraph 7 of Schedule A1 to TMA 1970	-
3	Income tax or corporation tax (partnerships)	This group applies where there is no requirement to provide information under regulations under paragraph 7 of Schedule A1 to TMA 1970.Return under section 12AA(2)(a) or (3)(a) of TMA 1970Accounts, statement or document required under section 12AA(2)(b) or (3)(b) of TMA 1970	This group applies where there is a requirement to provide information under regulations under paragraph 7 of Schedule A1 to TMA 1970.Return under regulations under paragraph 10 of Schedule A1 to TMA 1970Information required to be provided under regulations under paragraph 7 of Schedule A1 to TMA 1970	-
4	Value added tax	1Return under regulation 50 of the Value Added Tax Regulations 1995 (S.I. 1995/2518) for a current accounting year2Return under regulation 25(1)(c) of those regulations for a period which is more than 20 weeks, and is the period for which returns are (or are to be) usually made by the person in question	1Return under regulation 25(1) of the Value Added Tax Regulations 1995 (S.I. 1995/2518), other than a return under regulation 25(1)(a), (b) or (c)2Return under regulation 25(1)(c) of those regulations for a period which is more than 8 weeks but not more than 20 weeks, and is the period for which returns are (or are to be) usually made by the person in question	1Return under regulation 25(1)(a) of the Value Added Tax Regulations 1995 (S.I. 1995/2518)2Return under regulation 25(1)(c) of those regulations for a period which is not more than 8 weeks, and is the period for which returns are (or are to be) usually made, or a period for which returns are (or are to be) regularly made, by the person in question

• (2) Where an entry in column A, B or C of the Table which refers to legislation uses terms used in the legislation, the terms have the same meaning in the entry as in the legislation.

• (3) Before the coming into force of paragraph 3 of Schedule 14 to F(No.2)A 2017, the references in the Table to section 8(1AB)(b) of TMA 1970 are to be read as references to section 8(1)(b) of TMA 1970.

• (4) Before the coming into force of paragraph 4 of Schedule 14 to F(No.2)A 2017, the references in the Table to section 8A(1AB)(b) of TMA 1970 are to be read as references to section 8A(1)(b) of TMA 1970.

Interpretation

3

• (1) This paragraph applies for the interpretation of this Schedule.

• (2) References to the Table are to the Table in paragraph 2 (unless otherwise specified).

• (3) References to “return” include any return, information, statement, account or other document specified in column A, B or C of the Table.

• (4) Each entry in Column A, B or C of the Table is a “group” of returns, and references to returns in or belonging to a group of returns are to be read accordingly.

• (5) References to group 1A are to the group of returns in item 1, column A, to group 1B are to the group of returns in item 1, column B, and so on.

• (6) Each numbered paragraph in group 1B, 2B or 3B is a “digital reporting sub-group” of returns, and references to returns in or belonging to a digital reporting sub-group of returns are to be read accordingly.

• (7) References to digital reporting sub-group (1) of group 1B are to the returns in paragraph (1) in item 1, column B, to digital reporting sub-group (2) of group 1B are to the returns in paragraph (2) in item 1, column B, and so on.

• (8) Any reference to making a return includes a reference to filing, delivering or submitting a return.

• (9) “Due date”, in relation to a return, means the date by which it is required to be made.

• (10) A failure to make a return on or before the due date is treated as occurring on the day after the due date.

• (11) “HMRC” means Her Majesty's Revenue and Customs.

Application of Schedule to persons with multiple businesses etc

4

• (1) Sub-paragraphs (2) to (4) apply for the interpretation of this Schedule where a person—

• (a) carries on more than one business, and

• (b) in relation to two or more of those businesses (the “relevant businesses”), is required to make returns belonging to the same group of returns.

• (2) If the group of returns mentioned in sub-paragraph (1)(b) is group 1A, 2A, 3A, 4A, 4B or 4C, the person makes a single return belonging to that group for all of the relevant businesses and so there is a single group of returns of that description for those businesses.

• (3) If the group of returns mentioned in sub-paragraph (1)(b) is group 1B, 2B or 3B, there is a single group of returns of that description for all of the relevant businesses notwithstanding that the person makes separate returns belonging to that group for each of the relevant businesses.

• (4) Where there is a single group of returns of a particular description for two or more relevant businesses (see sub-paragraphs (2) and (3))—

• (a) the person has a single liability for points and penalties for those businesses;

• (b) any change to the number of relevant businesses does not affect the continuity of the group of returns or the penalty points that the person has for the group of returns.

• (5) For the purposes of this Schedule, references to a person who carries on more than one business include references to a person who is treated as carrying on more than one business by section 43(1) of VATA 1994 (groups of companies).

• (6) If a body corporate carries on a business in several divisions and the registration of the body corporate under VATA 1994 is in the names of those divisions, such that the body corporate makes separate returns belonging to group 4A, 4B or 4C for each of those divisions—

• (a) there is a separate group of returns of that description for each division, and

• (b) the body corporate has a separate liability for points and penalties for each division.

• (7) Accordingly, it follows from sub-paragraph (6) that where, in paragraph 5—

• (a) a limit on a person's liability to penalty points for a group of returns is specified, the limit applies separately in relation to the group of returns of that description for each division, and

• (b) a maximum number of penalty points for a group of returns is specified, the maximum applies separately in relation to the group of returns of that description for each division.

PART 2 — Liability to a penalty

Liability to penalty points

5

• (1) If a person fails to make a return on or before the due date, the person is liable to one penalty point for the group of returns to which the return belongs (but see sub-paragraphs (2) to (8)).

• (2) A person is not liable to more than one penalty point per month for each of the following groups of returns, even if in that month there is more than one failure to make a return in that group on or before the due date—

• (a) group 1A, 2A or 3A;

• (b) group 4A, 4B or 4C.

• (3) A person is not liable to more than one penalty point per month in respect of a failure to make a return in a digital reporting sub-group of returns, even if in that month there is more than one failure to make a return in that digital reporting sub-group on or before the due date.

• (4) For the purposes of sub-paragraph (3), digital reporting sub-groups (1) and (2) of group 1B or 2B are to be treated as a single digital reporting sub-group.

• (5) If—

• (a) a person carries on more than one business and in relation to two or more of those businesses is required to make returns belonging to digital reporting sub-group (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, and

• (b) the due dates for the returns belonging to the digital reporting sub-group in question do not all fall within the same month of a calendar quarter,

sub-paragraph (3) is to be read in relation to that digital reporting sub-group as if references to a month were references to a calendar quarter.

• (6) “Calendar quarter” means a period of 3 months beginning with 1 January, 1 April, 1 July or 1 October.

• (7) If there is more than one failure in a month or calendar quarter (as the case may be) to make a return in a group of returns, or in a digital reporting sub-group of returns, on or before the due date (see sub-paragraphs (2), (3) and (5)), the one penalty point for the month or calendar quarter to which the person is liable by virtue of this paragraph is for all of those failures.

• (8) A person is not liable to a penalty point for a group of returns if the person already has the maximum number of penalty points for that group of returns.

• (9) The maximum number of penalty points for a group of returns is—

• (a) if the group is in Column A of the Table, 2 points,

• (b) if the group is in Column B of the Table, 4 points, and

• (c) if the group is in Column C of the Table, 5 points.

• (10) See paragraphs 19 to 21 for further rules about liability to a penalty point.

Award of penalty points

6

• (1) Where a person is liable to a penalty point for a group of returns, HMRC may award the person a penalty point for that group.

• (2) Where HMRC award a penalty point they must notify the person, and state in the notice—

• (a) the failure (or failures) in respect of which the penalty point is awarded, and

• (b) the group of returns for which the penalty point is awarded.

• (3) HMRC may not award a penalty point after—

• (a) the later of date A and (where it applies) date B, or

• (b) where the penalty point is to be awarded in respect of a failure (or failures) to make, on or before the due date, a return in digital reporting sub-group (3) or (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, the later of date A and (where it applies) date C.

• (4) Date A is the end of the period of x weeks beginning with—

• (a) if the penalty point is to be awarded in respect of a single failure, the day on which the failure occurred;

• (b) if the penalty point is to be awarded in respect of more than one failure in the same month or, as the case may be, the same calendar quarter (see paragraph 5(7)), the day on which the latest of those failures occurred.

• (5) In sub-paragraph (4) “x weeks” means—

• (a) if the group of returns is in Column A of the Table, 48 weeks,

• (b) if the group of returns is in Column B of the Table, 11 weeks, and

• (c) if the group of returns is in Column C of the Table, 2 weeks.

• (6) Date B is the last day of the period of 12 months beginning with—

• (a) the end of the appeal period for the assessment of the liability to tax which would have been shown in the relevant return, or

• (b) if there is no such assessment, the date on which that liability is ascertained or it is ascertained that the liability is nil.

• (7) In sub-paragraph (6)(a)—

• “appeal period” means the period during which—an appeal could be brought (ignoring any possibility of an appeal out of time), oran appeal that has been brought has not been determined or withdrawn;

• “relevant return” means—if the penalty point is to be awarded in respect of a single failure to make a return on or before the due date, that return;if the penalty point is to be awarded in respect of more than one failure to make a return, on or before the due date, in the same month or, as the case may be, the same calendar quarter (see paragraph 5(7)), the return for which there was the latest due date in the period in question.

• (8) If more than one return is the relevant return by virtue of paragraph (b) of the definition of “relevant return” in sub-paragraph (7) and the same day is not date B in relation to all of those returns, treat date B as being the latest of those days.

• (9) Date C—

• (a) applies where, on date A, it was not reasonable to expect HMRC to be aware that the person was required to make the return (or the returns), and

• (b) is the last day of the period of 12 months beginning with the first day on which it was reasonable to expect HMRC to be aware that the person was required to make the return (or one of the returns).

• (10) For the purposes of this Schedule, a person “has” a penalty point if HMRC has awarded the person the penalty point, the penalty point or liability to it has not been cancelled and the penalty point has not expired.

Expiry of individual penalty points

7

• (1) A penalty point for a group of returns expires at the end of the relevant period, unless immediately before the end of that period the person has the maximum number of penalty points for that group of returns.

• (2) The relevant period is—

• (a) the period of 24 months beginning with the first day of the month after the month in which the failure or failures, in respect of which the point was awarded, occurred, or

• (b) where paragraph 6(3)(b) applied to the award of the point and the point was awarded after date A and on or before date C, the period of 24 months beginning with the day after the day on which the point was awarded.

• (3) Where the penalty point was awarded in respect of more than one failure by virtue of paragraph 5(5), the references in sub-paragraph (2)(a) to a month are to be read as references to a calendar quarter.

• (4) In this paragraph—

• “calendar quarter” has the meaning given by paragraph 5(6);

• “date A” and “date C” have the meanings given by paragraph 6.

Expiry of all penalty points for a group of returns

8

• (1) Each of a person's penalty points for a group of returns expires at the beginning of the first day on which both condition A and condition B are met.

• (2) Condition A is that the person has made each return in the group on or before its due date for the relevant length of time (or longer).

• (3) The relevant length of time is x months beginning with the first day of the month after the month in which the most recent failure to make a return in the group on or before its due date occurred.

• (4) In sub-paragraph (3) “x months” means—

• (a) if the group of returns is in Column A of the Table, 24 months,

• (b) if the group of returns is in Column B of the Table, 12 months, and

• (c) if the group of returns is in Column C of the Table, 6 months.

• (5) Condition B is met on any day if the person has made all the returns in the group whose due date fell in the period of 24 months ending with the previous day (whether or not those returns were made on or before their due date).

• (6) Where each of a person's penalty points for a group of returns expires under this paragraph, HMRC must notify the person.

Penalty points: effect of moving between groups of returns

9

• (1) Paragraphs 10 to 13 apply where, in relation to any item in the Table, a person—

• (a) ceases to be required to make returns in a group of returns specified in relation to that item in one column of the Table (the “old” group of returns), and

• (b) instead becomes required to make returns in a group of returns specified in relation to that item in another column of the Table (the “ new ” group of returns),

(for example, where a person ceases to be required to make returns in group 1A and instead becomes required to make returns in group 1B).

• (2) But where the returns in the old group of returns relate to a business or businesses carried on by the person, paragraphs 10 to 13 apply only if the returns in the new group of returns also relate to that business or all of those businesses.

10

• (1) This paragraph applies to determine the penalty points the person has for the new group of returns, on becoming required to make returns for the new group of returns.

• (2) If the person has no penalty points for the old group of returns, the person has no penalty points for the new group of returns.

• (3) If the person has penalty points for the old group of returns, the number of penalty points the person has for the new group of returns is determined by taking the number of penalty points the person has for the old group of returns and adjusting it in accordance with the table below.

• (4) If the adjustment gives a number of less than zero, treat the adjusted number of penalty points as zero.

Column in which old group of returns falls	Column in which new group of returns falls	Adjustment
Column A	Column B	Add 2 penalty points
Column A	Column C	Add 3 penalty points
Column B	Column A	Deduct 2 penalty points
Column B	Column C	Add 1 penalty point
Column C	Column A	Deduct 3 penalty points
Column C	Column B	Deduct 1 penalty point

11

• (1) This paragraph applies if the adjusted number of penalty points for the new group of returns is greater than zero, but less than the actual number of penalty points for the old group of returns.

• (2) Treat the person as having, for the new group of returns, the penalty points which were awarded in respect of the x most recent relevant failures (but if a single penalty point was awarded in respect of more than one relevant failure, for the purposes of this sub-paragraph treat those relevant failures as a single relevant failure).

• (3) “X” is the adjusted number of penalty points for the new group of returns.

• (4) Treat the penalty points in respect of the other relevant failures as having expired (so that the person has no penalty points for the old group of returns).

• (5) In this paragraph “relevant failure” means a failure to make a return in the old group of returns on or before its due date, in respect of which a penalty point was awarded.

12

• (1) This paragraph applies if the adjusted number of penalty points for the new group of returns is greater than the actual number of penalty points for the old group of returns.

• (2) Treat all the penalty points for the old group of returns as penalty points for the new group of returns.

• (3) Treat the additional penalty points as having been awarded in respect of relevant failures occurring on the same day as the most recent relevant failure.

• (4) For this purpose the additional penalty points are the penalty points added by way of adjustment to the actual number of penalty points for the old group of returns.

• (5) In this paragraph “relevant failure” means a failure to make a return in the old group of returns on or before its due date, in respect of which a penalty point was awarded.

13

• (1) Paragraph 8 applies in relation to the new group of returns with the following modifications.

• (2) Sub-paragraph (3) applies as if for the words from “month in which” to the end there were substituted “ first month for all or part of which a return in the new group of returns is required to be made ”.

• (3) The reference in sub-paragraph (5) to returns in the group includes returns in the old group of returns.

Penalty points: effect of change of representative member of VAT group

14

• (1) This paragraph applies where—

• (a) a person is replaced as the representative member of a group (“the former representative member”) by another member of the group (“the new representative member”) under section 43B of VATA 1994, and

• (b) the former representative member has penalty points for the group of 4A, 4B or 4C returns for the businesses that were treated by section 43(1) of VATA 1994 as being carried on by the former representative member (and are now treated by that section as being carried on by the new representative member).

• (2) Where this paragraph applies, treat the new representative member as having the penalty points that the former representative member has for the group of returns.

Liability to penalties

15

• (1) If a person fails to make a return on or before the due date and condition A or condition B is met, the person is liable to a penalty (but see sub-paragraphs (5) and (9)).

• (2) Condition A is that—

• (a) the person is awarded a penalty point in respect of the failure (including where the penalty point is awarded in respect of the failure and another failure or other failures), and

• (b) on being awarded that penalty point, or on being awarded after that failure a penalty point in respect of an earlier failure (or earlier failures), the person has the maximum number of penalty points for the group of returns to which the return belongs.

• (3) Condition B is that the failure occurs on a day on which the person has the maximum number of penalty points for the group of returns to which the return belongs.

• (4) The amount of a penalty under this paragraph is £200.

• (5) A person is not liable to more than one penalty per month in respect of a failure to make a return in a digital reporting sub-group of returns, even if in that month there is more than one failure to make a return in that digital reporting sub-group on or before the due date.

• (6) For the purposes of sub-paragraph (5), digital reporting sub-groups (1) and (2) of group 1B or 2B are to be treated as a single digital reporting sub-group.

• (7) If—

• (a) a person carries on more than one business and in relation to two or more of those businesses is required to make returns belonging to digital reporting sub-group (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, and

• (b) the due dates for the returns belonging to the digital reporting sub-group in question do not all fall within the same month of a calendar quarter,

sub-paragraph (5) is to be read in relation to that digital reporting sub-group as if references to a month were references to a calendar quarter.

• (8) “Calendar quarter” means a period of 3 months beginning with 1 January, 1 April, 1 July or 1 October.

• (9) If there is more than one failure in a month or calendar quarter (as the case may be) to make a return in a digital reporting sub-group of returns on or before the due date (see sub-paragraphs (5) and (7)), the one penalty for the month or calendar quarter to which the person is liable by virtue of this paragraph is for all of those failures.

• (10) See paragraphs 19 to 21 for further rules about liability to a penalty.

Assessments

16

• (1) Where a person is liable to a penalty under this Schedule HMRC may assess the penalty.

• (2) Where HMRC assess a penalty they must—

• (a) notify the person, and

• (b) state in the notice the failure (or, where paragraph 15(9) applies, the failures) for which the person is liable to a penalty.

• (3) Where a person is liable to a penalty because condition A in paragraph 15 is met, notice of an assessment of the penalty may not be issued before (but may be issued at the same time as) notice under paragraph 6 of the award of the penalty point as a result of which the person is liable to the penalty.

• (4) A penalty under this Schedule must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.

• (5) An assessment of a penalty under this Schedule—

• (a) is to be treated for procedural purposes in the same way as an assessment to the tax concerned (except in respect of a matter expressly provided for in this Schedule),

• (b) may be enforced as if it were an assessment to the tax concerned, and

• (c) may be combined with an assessment to the tax concerned.

Time limit for assessments

17

• (1) An assessment of a penalty under this Schedule may not be made after—

• (a) the later of date A and (where it applies) date B, or

• (b) where the penalty is to be assessed in respect of a failure (or failures) to make, on or before the due date, a return in digital reporting sub-group (3) or (4) of group 1B or 2B or digital reporting sub-group (2) of group 3B, the later of date A and (where it applies) date C.

(But see sub-paragraphs (7) and (8).)

• (2) Date A is the end of the period of 2 years beginning with—

• (a) if the penalty is to be assessed in respect of a single failure, the day on which the failure occurred;

• (b) if the penalty is to be assessed in respect of more than one failure in the same month or, as the case may be, the same calendar quarter (see paragraph 15(9)), the day on which the latest of the failures occurred.

• (3) Date B is the last day of the period of 12 months beginning with—

• (a) the end of the appeal period for the assessment of the liability to tax which would have been shown in the relevant return, or

• (b) if there is no such assessment, the date on which that liability is ascertained or it is ascertained that the liability is nil.

• (4) In sub-paragraph (3)(a)—

• “appeal period” means the period during which—an appeal could be brought (ignoring any possibility of an appeal out of time), oran appeal that has been brought has not been determined or withdrawn;

• “relevant return” means—if the penalty is to be assessed in respect of a single failure to make a return on or before the due date, that return;if the penalty is to be assessed in respect of more than one failure to make a return, on or before the due date, in the same month or, as the case may be, the same calendar quarter (see paragraph 15(9)), the return for which there was the latest due date in the period in question.

• (5) If more than one return is the relevant return by virtue of paragraph (b) of the definition of “relevant return” in sub-paragraph (4) and the same day is not date B in relation to all of those returns, treat date B as being the latest of those days.

• (6) Date C—

• (a) applies where, on date A, it was not reasonable to expect HMRC to be aware that the person was required to make the return (or the returns), and

• (b) is the last day of the period of 12 months beginning with the first day on which it was reasonable to expect HMRC to be aware that the person was required to make the return (or one of the returns).

• (7) Sub-paragraph (8) applies where—

• (a) a person is liable to a penalty in respect of a failure to make a return because condition A in paragraph 15 is met,

• (b) that condition is only met because the person has the maximum number of penalty points for the group of returns to which the return belongs on being awarded after that failure a penalty point in respect of an earlier failure (or earlier failures), and

• (c) when the penalty point is awarded in respect of the earlier failure (or earlier failures) an assessment of the penalty to which the person is liable may no longer be made because of sub-paragraph (1).

• (8) Where this sub-paragraph applies—

• (a) sub-paragraph (1) does not apply, and

• (b) the assessment of the penalty may instead be made during the period of 12 months beginning with the first day on which it was reasonable to expect HMRC to be aware of the earlier failure (or one of the earlier failures).

Power to amend figures by regulations

18

• (1) The Commissioners for HMRC may by regulations—

• (a) amend paragraph 5(9) so as to increase or reduce the maximum number of penalty points for a group of returns;

• (b) amend paragraph 8(4) so as to increase or reduce the number of months;

• (c) amend paragraph 8(5) so as to increase or reduce the number of months;

• (d) amend paragraph 15(4) so as to increase or reduce the amount of the penalty.

• (2) Regulations under sub-paragraph (1)(a) may also amend column 3 of the table in paragraph 10.

• (3) Regulations under this paragraph—

• (a) are to be made by statutory instrument;

• (b) may include transitional, transitory and saving provision.

• (4) A statutory instrument containing regulations under this paragraph may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

PART 3 — Supplementary provision

Reasonable excuse

19

• (1) Liability to a penalty point or a penalty under this Schedule does not arise in respect of a failure to make a return if the person satisfies HMRC (or on appeal, the tribunal) that the person had a reasonable excuse for the failure.

• (2) For this purpose—

• (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control,

• (b) where the person relies on another person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and

• (c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

• (3) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 23(1)).

Double jeopardy

20

A person is not liable to a penalty point or a penalty under this Schedule in respect of a failure in respect of which the person has been convicted of an offence.

Withdrawal of notice to make a return

21

• (1) This paragraph applies where—

• (a) a person is liable to a penalty point or a penalty under this Schedule in relation to a failure to make a return in paragraph (1) or (2) of group 1A or 1B, and

• (b) HMRC decide (on the request of the person or otherwise) to give the person a notice under section 8B of TMA 1970 withdrawing a notice under section 8 of that Act.

• (2) This paragraph also applies where—

• (a) the trustees of a settlement are, as a deemed single person (see paragraph 26), liable to a penalty point or a penalty under this Schedule in relation to a failure to make a return in paragraph (1) or (2) of group 2A or 2B, and

• (b) HMRC decide (on the request of a trustee of the settlement or otherwise) to give a trustee of the settlement a notice under section 8B of TMA 1970 withdrawing a notice under section 8A of that Act.

• (3) This paragraph also applies where—

• (a) the partners in a partnership are, as a deemed single person (see paragraph 25), liable to a penalty point or a penalty under this Schedule in relation to a failure to make a return in paragraph (1) or (2) of group 3A, and

• (b) HMRC decide, on a request by a partner in the partnership under section 12AAA of TMA 1970, to give a notice under that section withdrawing a notice under section 12AA of that Act.

• (4) The notice under section 8B or 12AAA of TMA 1970 may include provision cancelling liability to the penalty point or the penalty.

Appeals

22

A person may appeal against a decision of HMRC under this Schedule—

• (a) that the person is liable to a penalty point, or

• (b) that a penalty is payable by the person.

23

• (1) An appeal under paragraph 22 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's review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).

• (2) Sub-paragraph (1) does not apply—

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

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

24

• (1) On an appeal under paragraph 22 that is notified to the tribunal, the tribunal may—

• (a) where the appeal is under paragraph 22(a), affirm or cancel HMRC's decision that the person is liable to the penalty point;

• (b) where the appeal is under paragraph 22(b), affirm or cancel HMRC's decision that the penalty is payable by the person.

• (2) Where the appeal is under paragraph 22(b), the tribunal may also affirm or cancel HMRC's decision that the person was liable to any of the penalty points by virtue of which the person was liable to the penalty.

• (3) Sub-paragraph (2)—

• (a) applies in relation to a penalty point even if the time limit for appealing against it expired before the appeal under paragraph 22(b) was brought;

• (b) does not apply in relation to a penalty point if HMRC's decision that the person was liable to the penalty point was affirmed on an earlier appeal.

• (4) Sub-paragraph (5) applies if—

• (a) on an appeal under paragraph 22(b), the tribunal—

• (i) cancels a decision that a penalty is payable by a person, and

• (ii) cancels a decision that the person was liable to a penalty point, for a group of returns, by virtue of which the person was liable to the penalty,

• (b) after the penalty point mentioned in paragraph (a)(ii) was given by HMRC and before the decision mentioned in that paragraph was cancelled, the person failed to make a return in the same group on or before the due date, and

• (c) at the time the failure occurred, the person already had the maximum number of penalty points for that group of returns (see paragraph 5(8)).

• (5) HMRC may award a penalty point in respect of the failure before the end of the period of 12 months beginning with the day after the tribunal's decision on the appeal (and paragraph 6(3) does not apply).

• (6) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 23(1)).

Partnerships

25

• (1) For the purposes of this Schedule—

• (a) the partners in a partnership are together to be treated as if they were a single person (distinct from the persons who are partners in the partnership);

• (b) a failure by one or more partners in the partnership to make a return on or before the due date is to be treated as a failure by the deemed single person referred to in paragraph (a);

• (c) other things done by or in relation to a partner in the partnership are also to be treated as done by or in relation to that deemed single person.

• (2) The deemed single person referred to in paragraph (a) is to be treated as continuing in existence even if there is a change in the partnership.

• (3) Where the deemed single person referred to in paragraph (a) is assessed to a penalty, every relevant partner is jointly and severally liable for the penalty.

• (4) For the purposes of sub-paragraph (3)—

• (a) “relevant partner” means a person who is a partner in the partnership on the day on which the penalty is assessed;

• (b) a person is a relevant partner even if the person was not a partner in the partnership when liability was incurred to one or more of the penalty points by virtue of which liability to the penalty arose;

• (c) the relevant partners are jointly and severally liable for the penalty even if none of them were partners in the partnership when liability was incurred to the penalty points by virtue of which liability to the penalty arose.

Settlements

26

• (1) For the purposes of this Schedule—

• (a) the trustees of a settlement are together to be treated as if they were a single person (distinct from the persons who are trustees of the settlement);

• (b) a failure by one or more trustees of the settlement to make a return on or before the due date is to be treated as a failure by the deemed single person referred to in paragraph (a);

• (c) other things done by or in relation to a trustee of the settlement are also to be treated as done by or in relation to that deemed single person.

• (2) The deemed single person referred to in paragraph (a) is to be treated as continuing in existence even if there is a change in the trustees of the settlement.

• (3) Where the deemed single person referred to in paragraph (a) is assessed to a penalty, every relevant trustee is jointly and severally liable for the penalty.

• (4) For the purposes of sub-paragraph (3)—

• (a) “relevant trustee” means a person who is a trustee of the settlement on the day on which the penalty is assessed;

• (b) a person is a relevant trustee even if the person was not a trustee of the settlement when liability was incurred to one or more of the penalty points by virtue of which liability to the penalty arose;

• (c) the relevant trustees are jointly and severally liable for the penalty even if none of them were trustees of the settlement when liability was incurred to the penalty points by virtue of which liability to the penalty arose.

SCHEDULE 25

PART 1 — Introduction

Introduction

1

• (1) This Schedule provides for penalties to be payable by a person who, by failing to make a return listed in the third column of the Table below on or before the due date, deliberately withholds information which would enable or assist HMRC to assess the person's liability to tax.

• (2) Paragraph 20 provides for this Schedule to apply with modifications where the return relates to a partnership.

	Tax to which return relates	Return
1	Income tax or capital gains tax	1Return under section 8 of TMA 19702Accounts, statement or document required under section 8(1AB)(b) of TMA 1970
2	Income tax or capital gains tax	1Return under section 8A of TMA 19702Accounts, statement or document required under section 8A(1AB)(b) of TMA 1970
3	Income tax or corporation tax	1Return under section 12AA(2)(a) or (3)(a) of TMA 19702Accounts, statement or document required under section 12AA(2)(b) or (3)(b) of TMA 1970
4	Income tax or corporation tax	Return under regulations under paragraph 10 of Schedule A1 to TMA 1970

• (3) Before the coming into force of paragraph 3 of Schedule 14 to F(No.2)A 2017, the reference in the Table to section 8(1AB)(b) of TMA 1970 is to be read as a reference to section 8(1)(b) of TMA 1970.

• (4) Before the coming into force of paragraph 4 of Schedule 14 to F(No.2)A 2017, the reference in the Table to section 8A(1AB)(b) of TMA 1970 is to be read as a reference to section 8A(1)(b) of TMA 1970.

Interpretation

2

• (1) This paragraph applies for the interpretation of this Schedule.

• (2) “Return” means any return, statement, account or other document specified in the third column of the Table in paragraph 1.

• (3) Any reference to making a return includes a reference to filing, delivering or submitting a return.

• (4) “Due date”, in relation to a return, means the date by which it is required to be made.

• (5) “HMRC” means Her Majesty's Revenue and Customs.

PART 2 — Liability to a penalty

Penalty for deliberately withholding information

3

• (1) A person who fails to make a return on or before the due date is liable to a penalty under this paragraph if (and only if) the condition in sub-paragraph (2) is met.

• (2) The condition is that at any time (including any time after the due date), by failing to make the return, the person deliberately withholds information which would enable or assist HMRC to assess the person's liability to tax.

• (3) If the withholding of the information is deliberate and concealed, the penalty is—

• (a) the relevant percentage of any liability to tax which would have been shown in the return in question, or

• (b) if the amount in paragraph (a) is less than £300, £300.

• (4) For the purposes of sub-paragraph (3)(a) the relevant percentage is—

• (a) for the withholding of category 1 information, 100%,

• (b) for the withholding of category 2 information, 150%, and

• (c) for the withholding of category 3 information, 200%.

• (5) If the withholding of the information is deliberate but not concealed, the penalty is—

• (a) the relevant percentage of any liability to tax which would have been shown in the return in question, or

• (b) if the amount in paragraph (a) is less than £300, £300.

• (6) For the purposes of sub-paragraph (5)(a) the relevant percentage is—

• (a) for the withholding of category 1 information, 70%,

• (b) for the withholding of category 2 information, 105%, and

• (c) for the withholding of category 3 information, 140%.

• (7) Paragraph 4 explains the categories of information.

• (8) The withholding of information by a person is—

• (a) deliberate and concealed, if the person deliberately withholds the information and makes arrangements to conceal the fact that the information has been withheld;

• (b) deliberate but not concealed, if the person deliberately withholds the information but does not make arrangements to conceal the fact that the information has been withheld.

• (9) See paragraphs 15 and 16 for further rules about liability to a penalty.

Categories of information

4

• (1) Information is category 1 information if—

• (a) it involves a domestic matter, or

• (b) it involves an offshore matter and the territory in question is a category 1 territory.

• (2) Information is category 2 information if—

• (a) it involves an offshore matter or an offshore transfer,

• (b) the territory in question is a category 2 territory, and

• (c) it is information which would enable or assist HMRC to assess the person's liability to the tax in question.

• (3) Information is category 3 information if—

• (a) it involves an offshore matter or an offshore transfer,

• (b) the territory in question is a category 3 territory, and

• (c) it is information which would enable or assist HMRC to assess the person's liability to the tax in question.

• (4) Information “involves an offshore matter” if the liability to tax which would have been shown in the return includes a liability to tax charged on or by reference to—

• (a) income arising from a source in a territory outside the UK,

• (b) assets situated or held in a territory outside the UK,

• (c) activities carried on wholly or mainly in a territory outside the UK, or

• (d) anything having effect as if it were income, assets or activities of a kind described above.

• (5) Information “involves an offshore transfer” if—

• (a) it does not involve an offshore matter,

• (b) it is information which would enable or assist HMRC to assess the person's liability to the tax in question,

• (c) by failing to make the return, the person deliberately withholds the information (whether or not the withholding of the information is also concealed), and

• (d) the applicable condition in paragraph 6 is satisfied.

• (6) Information “involves a domestic matter” if it does not involve an offshore matter or an offshore transfer.

• (7) If the information which the person withholds falls into more than one category—

• (a) the person's failure to make the return is to be treated for the purposes of this Schedule as if it were separate failures, one for each category of information according to the matters or transfers which the information involves, and

• (b) for each separate failure, the liability to tax which would have been shown in the return in question is taken to be such share of the liability to tax which would have been shown in the return mentioned in paragraph (a) as is just and reasonable.

• (8) For the purposes of this Schedule—

• (a) paragraph 21A of Schedule 24 to FA 2007 (classification of territories) has effect, but

• (b) an order under that paragraph does not apply to a failure if the due date is before the date on which the order comes into force.

• (9) In this paragraph and paragraph 6—

• (a) “assets” has the meaning given in section 21(1) of TCGA 1992, but also includes sterling;

• (b) “UK” means the United Kingdom, including the territorial sea of the United Kingdom.

Power to make changes relating to categories of information by regulations

5

• (1) The Treasury may by regulations amend this Part of this Schedule so as to—

• (a) add, amend or remove categories of information for the purposes of determining the amount of a penalty under paragraph 3;

• (b) amend the relevant percentage specified in that paragraph for the withholding of information in any category.

• (2) Regulations under this paragraph may include consequential provision, including provision amending, repealing or revoking any provision of an Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

• (3) In sub-paragraph (2) “subordinate legislation” has the same meaning as in the Interpretation Act 1978.

Offshore transfers

6

• (1) This paragraph makes provision in relation to offshore transfers.

• (2) Where the liability to tax which would have been shown in the return is a liability to income tax, the applicable condition is satisfied if the income on or by reference to which the tax is charged, or any part of the income—

• (a) is received in a territory outside the UK, or

• (b) is transferred before the relevant date to a territory outside the UK.

• (3) Where the liability to tax which would have been shown in the return is a liability to capital gains tax, the applicable condition is satisfied if the proceeds of the disposal on or by reference to which the tax is charged, or any part of the proceeds—

• (a) are received in a territory outside the UK, or

• (b) are transferred before the relevant date to a territory outside the UK.

• (4) In the case of a transfer falling within sub-paragraph (2)(b) or (3)(b), references to the income or proceeds transferred are to be read as including references to any assets derived from or representing the income or proceeds.

• (5) In relation to an offshore transfer, the territory in question for the purposes of paragraph 4 is the highest category of territory by virtue of which the information involves an offshore transfer.

• (6) “Relevant date” means the date on which the person becomes liable to a penalty under this Schedule.

Reductions for disclosure

7

• (1) Paragraph 8 provides for reductions in the penalty under this Schedule where the person discloses information which has been withheld by a failure to make a return (“relevant information”).

• (2) A person discloses relevant information that involves a domestic matter by—

• (a) telling HMRC about it,

• (b) giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld, and

• (c) allowing HMRC access to records for the purpose of checking how much tax is so unpaid.

• (3) A person discloses relevant information that involves an offshore matter or an offshore transfer by—

• (a) telling HMRC about it,

• (b) giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld,

• (c) allowing HMRC access to records for the purpose of checking how much tax is so unpaid, and

• (d) providing HMRC with additional information.

• (4) The Treasury must make regulations setting out what is meant by “additional information” for the purposes of sub-paragraph (3)(d).

• (5) Disclosure of relevant information—

• (a) is “unprompted” if made at a time when the person has no reason to believe that HMRC have discovered or are about to discover the relevant information, and

• (b) otherwise, is “prompted”.

• (6) In relation to disclosure “quality” includes timing, nature and extent.

• (7) Paragraph 4(4) to (6) applies to determine whether relevant information involves an offshore matter, an offshore transfer or a domestic matter.

8

• (1) If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table in this paragraph (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.

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

Standard percentage	Minimum percentage for prompted disclosure	Minimum percentage for unprompted disclosure
70%	45%	30%
100%	60%	40%
105%	62.5%	40%
140%	80%	50%
150%	85%	55%
200%	110%	70%

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

Special reduction

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• (1) If HMRC think it right because of special circumstances, they may reduce a penalty under this Schedule.

• (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 a taxpayer is balanced by a potential over-payment by a taxpayer.

• (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.

Interaction with other penalties

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• (1) This paragraph applies where—

• (a) a person is liable to a penalty under this Schedule in respect of a failure, and

• (b) the amount of the penalty is the amount in paragraph 3(3)(a) or 3(5)(a).

• (2) The amount of that penalty is to be reduced by the amount of any other penalty incurred by the person, the amount of which is determined by reference to the same liability to tax.

• (3) In sub-paragraph (2), the reference to “any other penalty” does not include—

• (a) a penalty under Schedule 26 (penalties for failure to pay tax),

• (b) a penalty under Schedule 56 to FA 2009 (penalty for late payment of tax), or

• (c) a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc.).

Determination of penalty where no return made

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• (1) For the purposes of a penalty under this Schedule references to a liability to tax which would have been shown in a return are references to the amount which, if a complete and accurate return had been delivered on the due date, would have been shown to be due or payable by the taxpayer in respect of the tax concerned for the period to which the return relates.

• (2) In the case of a penalty which is assessed at a time before the person makes the return to which the penalty relates, HMRC may either—

• (a) proceed on the assumption that the amount in paragraph 3(3)(a) is less than the amount in paragraph 3(3)(b), or the amount in paragraph 3(5)(a) is less than the amount in paragraph 3(5)(b), or

• (b) determine the amount mentioned in sub-paragraph (1) to the best of HMRC's information and belief.

• (3) If the person subsequently makes a return, the penalty must be re-assessed by reference to the amount of tax shown to be due and payable in that return (but subject to any amendments or corrections to the return).

Assessments

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• (1) Where a person is liable to a penalty under this Schedule HMRC may assess the penalty.