If that corrective action hasn’t been taken in a timely manner then HMRC will charge each of the relevant partners a penalty.
The total amount of the penalties for not taking corrective action is equal to 20% of the value of the denied advantage, and each relevant partner will be liable to their appropriate share of that total amount. However if the partnership has co-operated with HMRC they may reduce the penalty percentage rate.
Once HMRC has decided on the amount of the penalties that they’re going to charge, they will send a notice of the penalty assessment to each relevant partner.
Before they send a notice of the penalty assessment, HMRC will normally write to tell each relevant partner how they’ve worked out the amount of the penalty. If the relevant partner thinks there is something the partnership has done to co-operate that HMRC have not taken into account, then HMRC need to be told so they can consider whether it affects the penalty. It is possible for the representative partner to appeal whether or not HMRC wrote to the relevant partners about the penalty before sending the notices of penalty assessment.
If the partnership follower notice relates to a compliance check, the latest day on which HMRC can send a notice of penalty assessment is 90 days from the date on which the compliance check is completed.
If the partnership follower notice relates to an appeal or a further appeal, the notice of penalty assessment must be issued 90 days from the earliest of the dates on which:
- the representative partner took corrective action
- the final ruling was made on the partnership’s appeal or further appeal
- the appeal or further appeal was abandoned or otherwise disposed of before it was determined by the court or tribunal
The tax legislation that deals with follower notices refers to a compliance check as a tax enquiry.
The penalty percentage rate can be reduced if the partnership has co-operated with HMRC before they send notices of penalty assessment to the relevant partners. This includes actions such as doing one or more of the following:
- provided HMRC with reasonable help in working out the amount of the tax advantage
- counteracted the denied advantage after the relevant partners have become liable to a penalty (or given up the denied advantage if the partnership follower notice relates to an appeal)
- given HMRC information that enables them to take corrective action
- given HMRC information that enables them to enter into an agreement with the partnership to counteract the denied advantage
- given HMRC access to tax records so that they can make sure that the denied advantage is fully counteracted
- HMRC cannot reduce the penalty percentage to less than 4%.
If you or your clients are part of a partnership that has received a follower notice get in touch as Bedrock can help manage any negotiations with HMRC on your behalf. More details can also be found on the .Gov website.
