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CLAUSE 46: CIVIL PENALTIES

SUMMARY

1.      Clause 46 makes provision for civil penalties and gives effect to Schedule 10 to the Act which makes provision about the assessment of civil penalties imposed and about interest on such penalties. 

DETAILS OF THE CLAUSE

2.      Subsection (1) enables the Commissioners or an appeal tribunal to reduce a civil penalty by any amount including nil  but further provides that a tribunal may cancel the whole or part of any reduction made by the Commissioners.

3.      Subsection (2) sets out those matters (insufficiency of funds, actual loss and good faith) which are not to be taken into account in determining whether a penalty should be reduced.

4.      Subsection (3) states that insufficiency of funds and reliance on a third party are not reasonable excuses.

5.      Subsection (4) provides for Schedule 10 ( civil penalties and interest) to have effect.

6.      Subsection (5) enables the Treasury to alter the amount of a fixed penalty by statutory instrument if the value of money has changed since the fixing of that penalty.

7.      Subsection (6) defines the time of the fixing of the penalty as either the time of the passing of this Act or the time of the making of the order which most recently modified the amount of the penalty.

8.      Subsection (7) provides that an order under subsection (5) above is subject to the affirmative procedure.

9.      Subsection (8) defines “civil penalty” as being any penalty imposed upon a person other than those resulting from a criminal conviction.

SCHEDULE 10

AGGREGATES LEVY:  ASSESSMENT OF CIVIL PENALTIES AND INTEREST ON THEM

Paragraph 1.  Preliminary

This paragraph provides various definitions of terms used in Schedule 10.

Paragraph 2.  Assessments to penalties, etc.

Where a person is liable to a penalty, this paragraph empowers the Commissioners to assess the amounts due by way of penalty and, if necessary, to make supplementary assessments where the original assessment was too low.  The Commissioners may still assess for a penalty even if the conduct giving rise to the penalty has ceased.  Once an amount has been assessed and notified to a person it shall be recoverable as levy due but this provision shall not apply so as to require interest to be payable on penalties except in accordance with this Schedule nor shall it have effect to the extent that the penalty assessment has been reduced or withdrawn.

Where someone is assessed to a penalty and also assessed to aggregates levy or interest, then these assessments can be combined and notified in one assessment.  However, the combined assessment must separately identify the penalty.

Paragraph 3.  Further assessments to daily penalties

This paragraph applies in relation to assessments for civil penalties for failure to provide information and failure to produce a document.  Any such assessment must contain a date to which the amount of the daily penalty is calculated.  The rate of daily penalty is £20.  Assessments may be made if further penalties accrue in respect of a continuing failure.  Where the assessment to a civil penalty contains a date by which the failure has to be  remedied, and this is done in time, then daily penalties cease to accrue beyond the date to which they have already been calculated.

Paragraph 4.  Time limits on penalty assessments   

This paragraph specifies the time limits for assessing civil penalties.  An assessment to a penalty cannot be made more than three years after the conduct to which the penalty relates.  The exception to this rule is if aggregates levy has been lost as a result of conduct for which a person has been convicted of a fraud offence or where there has been evasion or a penalty for failure to notify.  In these cases, the time limit is extended to twenty years.

Certain time limits are also set out for penalty assessments issued after the taxpayer’s death.

Paragraph 5.  Penalty interest on unpaid penalties

This paragraph makes provision for unpaid penalties to incur penalty interest for the period running from the date of notification of the assessment to the day before the day on which the assessed penalty is paid.  If, when the Commissioners assess a penalty, they specify a date for payment and the trader pays in time, then the amount paid by that date shall not be subject to penalty interest.

This paragraph describes penalty interest as compound interest calculated at the penalty rate, and calculated on a daily basis but added to the principal once a month.  The penalty rate is the ordinary interest rate under section 197 of the Finance Act 1996 plus 10 percentage points.

The Commissioners (or an appeal tribunal) may reduce the penalty interest incurred under this paragraph to any amount including nil.  Furthermore, where a person satisfies the Commissioners (or an appeal tribunal) that there is a reasonable excuse for the conduct giving rise to the liability to pay penalty interest, this reasonable excuse may be taken into account in determining any reduction.  In considering what is a reasonable excuse matters such as insufficiency of funds, actual loss of levy and good faith are irrelevant.

Paragraph 6.  Supplemental provisions about interest

This paragraph makes supplemental provisions about interest under paragraph 5 and provides that it shall be paid without any deduction of income tax.  Where interest has been charged which turns out not to be due, the paragraph treats interest, in these cases, as never having been due and provides for reasonable adjustments to be made.

Paragraph 7.  Assessments to penalty interest on unpaid penalties

This paragraph provides for assessing the penalty interest incurred under paragraph 5.  The Commissioners may assess the amount and notify the person.  The Commissioners may make supplementary assessments if the original assessment is too low.

Where an amount has been assessed and notified, it shall be recoverable as if it were aggregates levy due.  However, this provision shall not apply so as to require interest to be payable on interest except in so far as it is penalty interest and shall not have effect to the extent that the assessment has been reduced or withdrawn.

The time limits for penalty assessments also apply to assessments for interest on penalties.  Where someone is assessed to interest on a penalty and also assessed to aggregates levy, the assessments can be combined and notified  in one assessment.  However, the combined assessment must separately identify the interest.

Paragraph 8.  Further assessments to interest on penalties 

A notice of assessment to penalty interest on unpaid penalties must contain a date up to which the amount of interest is calculated.  If interest continues to accrue, further assessments may be made.  The Commissioners may also specify a date for payment on an assessment and, if the interest is paid within that time, no further interest will accrue beyond the date specified.