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Introduction

Under the penalty legislation introduced by FA 2008, Sch 41, where a failure to notify has occurred, the taxpayer is exposed to a penalty.

The rate of the penalty is based on the behaviour of the person and whether the disclosure of an error has been prompted or unprompted. This rate is then applied to the potential lost revenue (PLR), which is the amount of tax outstanding at a particular date. This is discussed in detail in the Penalties for failure to notify guidance note.

The rate of penalty can be reduced if the taxpayer comes forward to inform HMRC about the failure to notify and it can be reduced further by the nature and quality of the information and documentation provided to HMRC. This is known as the quality of disclosure and is discussed in this guidance note.

A penalty for failure to notify can be completely reduced where a taxpayer has a reasonable excuse. See the Reasonable