Paragraph 18 I1

For paragraph 26 and the italic heading before it (penalty for dishonest conduct) substitute—

“Penalty for sanctionable conduct

26

(1)

A person who engages in sanctionable conduct is liable to a penalty.

(2)

The penalty to which the person is liable is—

(a)

in a case in which potential lost revenue is attributable to the sanctionable conduct (see paragraph 26C)—

(i)

the appropriate percentage of the potential lost revenue determined in accordance with paragraph 26C, or

(ii)

if higher, £7,500;

(b)

in any other case, £7,500.

(3)

But if the person would, but for this sub-paragraph, be liable to a penalty of an amount that is higher than £1,000,000, the person is instead liable to a penalty of that amount.

(4)

For the purposes of this paragraph, the “appropriate percentage” is—

(a)

70%, or

(b)

if the person disclosed the sanctionable conduct, the percentage determined in accordance with sub-paragraphs (5) and (6).

(5)

If the person disclosed the sanctionable conduct, HMRC must reduce the appropriate percentage from 70% to a percentage that reflects the quality of the disclosure.

(6)

But the appropriate percentage may not be reduced to a percentage that is below—

(a)

in the case of a prompted disclosure, 35%, and

(b)

in the case of an unprompted disclosure, 20%.

(7)

This paragraph is subject to paragraphs 26B (increased penalties) and 27 (special reduction).

Disclosure of conduct

26A

(1)

For the purposes of paragraph 26, a person “discloses” sanctionable conduct by—

(a)

telling HMRC about it,

(b)

giving HMRC reasonable help in identifying the client or clients concerned and in quantifying the loss of tax revenue (if any) brought about by it, and

(c)

allowing HMRC access to records for the purpose of ensuring that any such loss is recovered or otherwise properly accounted for.

(2)

A disclosure is “unprompted” if it is made at a time when the person has no reason to believe that HMRC have discovered or are about to discover the sanctionable conduct.

(3)

Otherwise, a disclosure is “prompted”.

(4)

In relation to disclosure, “quality” includes timing, nature and extent.

Increased penalties

26B

(1)

Sub-paragraph (2) applies where—

(a)

a person is liable to a penalty under paragraph 26, and

(b)

in the period of 20 years ending with the day on which the person became liable to the penalty, the person has been assessed to a penalty under that paragraph on more than 1, but fewer than 6, occasions.

(2)

Paragraph 26 applies in relation to the penalty mentioned in sub-paragraph (1)(a) as if—

(a)

each reference to 70% of the potential lost revenue were a reference to 85% of the potential lost revenue, and

(b)

the reference in sub-paragraph (3) to £1,000,000 were a reference to £5,000,000.

(3)

Sub-paragraph (4) applies where—

(a)

a person is liable to a penalty under paragraph 26, and

(b)

in the period of 20 years ending with the day on which the person became liable to the penalty, the person has been assessed to a penalty under that paragraph on 6 or more occasions.

(4)

Paragraph 26 applies in relation to the penalty mentioned in sub-paragraph (3)(a) as if—

(a)

each reference to 70% of the potential lost revenue were a reference to 100% of the potential lost revenue, and

(b)

sub-paragraph (3) (maximum amount) were omitted.

(5)

For the purposes of sub-paragraphs (1)(b) and (3)(b), a penalty under paragraph 26 is not to be taken into account if—

(a)

the person was assessed to the penalty more than 4 years before the day mentioned in sub-paragraph (1)(b) or (3)(b) (as the case may be), and

(b)

in the period of 4 years after the penalty was assessed, the person was not assessed to another such penalty.

(6)

Where—

(a)

a penalty under paragraph 26 is not to be taken into account in accordance with sub-paragraph (5), and

(b)

the person had previously been assessed to one or more other penalties under paragraph 26,

those previous penalties are also not to be taken into account for the purposes of sub-paragraphs (1)(b) and (3)(b).

(7)

For the purposes of sub-paragraphs (1)(b) and (3)(b), if a person is assessed to a penalty under paragraph 26 and the penalty is, at any time, subsequently set aside or otherwise cancelled, the penalty is to be treated from that time as if it was not assessed on the person.

Potential lost revenue

26C

(1)

Potential lost revenue is attributable to a tax adviser’s sanctionable conduct if—

(a)

an act within sub-paragraph (2) takes place, and

(b)

the sanctionable conduct includes the tax adviser—

(i)

doing the act on behalf of the client, or

(ii)

advising or assisting the client to do the act.

(2)

The following acts are within this sub-paragraph—

(a)

the giving to HMRC of a document of a kind listed in the table in paragraph 1 of Schedule 24 to FA 2007 (error in taxpayer’s document) by a client where the condition in paragraph 1(2) of that Schedule is satisfied;

(b)

a failure by a client to comply with an obligation specified in the table in paragraph 1 of Schedule 41 to FA 2008 (failure to notify etc);

(c)

a failure by a client to make or deliver a return specified in the table in paragraph 1 of Schedule 55 to FA 2009 (failure to make returns etc) on or before the filing date where the failure continues after the end of the period of 12 months beginning with the penalty date;

(d)

a failure by a client to make a return specified in the third column of the table in paragraph 1 of Schedule 25 to FA 2021 (failure to make returns etc) on or before the due date.

(3)

In sub-paragraph (2)(c) “filing date” and “penalty date” have the same meaning as in Schedule 55 to FA 2009 (see paragraph 1(4) of that Schedule).

(4)

In sub-paragraph (2)(d) “due date” has the same meaning as in Schedule 25 to FA 2021 (see paragraph 2(4) of that Schedule).

(5)

The amount of potential lost revenue that is attributable to the sanctionable conduct is—

(a)

in a case within sub-paragraph (2)(a), the potential lost revenue in respect of the inaccuracy in question as determined in accordance with paragraphs 5 to 8 of Schedule 24 to FA 2007;

(b)

in a case within sub-paragraph (2)(b), the potential lost revenue in respect of the failure as determined in accordance with paragraphs 7 and 11 of Schedule 41 to FA 2008;

(c)

in a case within sub-paragraph (2)(c), the amount of the liability to tax which would have been shown in the return in question as determined in accordance with paragraph 24 of Schedule 55 to FA 2009;

(d)

in a case within sub-paragraph (2)(d), the amount of the liability to tax which would have been shown in the return in question as determined in accordance with paragraph 11 of Schedule 25 to FA 2021.

(6)

In its application for the purposes of sub-paragraph (5)(c), paragraph 24(2) of Schedule 55 to FA 2009 (determination of penalty where no return made) has effect as if references to a penalty were references to a penalty under this Schedule.

(7)

In its application for the purposes of sub-paragraph (5)(d), paragraph 11(2) and (3) of Schedule 25 to FA 2021 (determination of penalty where no return made) has effect as if references to a penalty were references to a penalty under this Schedule.”