If you fail to comply with a requirement (a ‘relevant requirement’) imposed by or under section 22 or 23 of the LT(S)A 2014 (notifying us in relation to matters concerning registration, or cancellation of registration, for SLfT – see SLfT4001) and the failure was careless or deliberate on your part, you are liable to a penalty of:
- 30% of the potential lost revenue for a careless failure; or
- 100% of the potential lost revenue for a deliberate failure.
You are not liable to a penalty for failing to comply with a relevant requirement if you satisfy us or (on appeal) the tribunal that there is a reasonable excuse for that failure. See RSTP3022 for guidance on what may, and may not, constitute a reasonable excuse.
A failure is careless if it is due to you failing to take reasonable care (see RSTP3025). In other words, if you took reasonable care the inaccuracy is neither deliberate nor careless.
A failure which was neither deliberate nor careless on your part at an earlier time is to be treated as being careless if you discovered the failure at a later time and did not take reasonable steps to inform us as soon as practicable after you discovered the failure.
The potential lost revenue in the case of this penalty is the amount of tax (if any) which you are liable to for the period:
- beginning on the date from which you are required by the relevant requirement to be registered; and
- ending on the date on which we were notified of, or otherwise became fully aware of, your liability to be registered.
The definition of potential lost revenue in RSTP3014 does not apply in relation to this penalty.
When calculating potential lost revenue, no account is to be taken of the fact that the potential lost revenue is or may be balanced by a potential over-payment by another person.
Circumstances under which this penalty can be reduced
If you incur another penalty (‘penalty 2’) whose amount is determined by reference to the same liability to tax (other than a penalty for failing to make a tax return or pay tax on time), the amount of the penalty for failing to comply with a relevant requirement (‘penalty 1’) is reduced by the amount of this other penalty.
In other words, no reduction to penalty 1 occurs under this rule where penalty 2 is a fixed or ‘up to’ amount – reduction only occurs where penalty 2 is calculated on a proportionate or percentage basis and is not a penalty for failing to either make a tax return on time (see RSTP3005) or pay tax on time (see RSTP3008).
At the current time, there are only three types of penalty in relation to the devolved taxes which would invoke this rule:
- inaccuracy in a taxpayer document attributable to the taxpayer (see RSTP3011);
- inaccuracy in a taxpayer document attributable to another person (see RSTP3012); and
- failing to notify us about an under-determination or under-assessment of tax in a Revenue Scotland determination or assessment (see RSTP3013).
We may also reduce the amount of a penalty for failing to comply with a relevant requirement if:
- you disclose the failure to comply with the relevant requirement to us (see RSTP3024); or
- we think it is right to do so because of special circumstances (see RSTP3023).
Assessing and paying the penalty
We must make an assessment and notify you of your liability to this penalty (stating the period against which the penalty has been assessed) within the period of 12 months beginning with:
- the end of the ‘appeal period’ (see below) for the assessment of tax which is unpaid as a result of the failure to comply with the relevant requirement (and against which the penalty is being assessed); or
- if there is no such assessment, the date on which the amount of tax unpaid by reason of the failure is ascertained.
The ‘appeal period’ is the period during which an appeal could be brought (see RSTP6008), or the period during which an appeal that has been brought has not been determined or withdrawn.
Subject to the above time limit, we can make a supplementary assessment of your liability to this penalty if an earlier assessment we made was calculated using an underestimate of the potential lost revenue.
For example, if we initially assess you as being liable to a penalty for £300 due to a careless failure with a potential lost revenue of £1,000, and we later discover that the actual potential lost revenue was £1,500, we can make a supplementary assessment the effect of which is that you are liable to a further penalty of £150 (so that the initial and later penalties total 30% of the actual potential lost revenue, which amounts to £450 in this example).
We can combine an assessment (or supplementary assessment) of this penalty with any assessment we make in relation to your tax liability.
You must pay the penalty no later than 30 days from the date on which we issued the notice of the penalty to you.
We will charge interest on the amount of any unpaid penalty from the date on which the penalty is due to be paid until you pay it (see RSTP4003).
A penalty for failing to comply with a relevant requirement is treated for enforcement purposes (see RSTP5001) as an assessment to tax. This means that we have the same debt enforcement and recovery powers in relation to this penalty (and other penalties) as we have in relation to tax.