CH178220 | Sanctionable conduct by tax advisers: penalty for sanctionable conduct: determining attributable potential lost revenue

If we have determined that a tax adviser has engaged in sanctionable conduct, then we will issue them with a conduct notice. Once we have issued them with a conduct notice, we may then assess them for a penalty.

The first step in determining the amount of the penalty is to determine whether there is potential lost revenue “attributable” to the person’s sanctionable conduct. If there is no attributable potential lost revenue, then the penalty amount will be £7,500 (subject to any special reduction – see CH178330.

To determine if there is attributable potential lost revenue, we must first consider whether any of the following have taken place:

• The tax adviser’s client (or the tax adviser on behalf of the client) has given us a document (which is listed in the table in paragraph 1 of Schedule 24 to the Finance Act 2007) and that document contains an inaccuracy which amounts to, or leads to, an understatement of a liability to tax, a false or inflated statement of a loss, or a false or inflated claim to repayment of tax.

• The tax adviser’s client has failed to comply with a relevant obligation as defined in paragraph 1 of Schedule 41 to the Finance Act 2008.

• The tax adviser’s client has failed, for more than 12 months, to make or deliver a return specified in the table in paragraph 1 of Schedule 55 to the Finance Act 2009.

• The tax adviser’s client has failed, on or before the due date, to make or deliver a return in the third column of the table in paragraph 1 of Schedule 25 to the Finance Act 2021.

These are all scenarios in which the taxpayer themselves could be liable to a tax-geared penalty for deliberately doing something – though whether or not the taxpayer is liable to a penalty, and of what type or amount, is not relevant for determining the tax adviser’s penalty.

If one of the above scenarios has taken place, then we must determine whether the tax adviser is responsible for it, in whole or in part, through their sanctionable conduct. This means that the tax adviser did (or failed to do) the act on behalf of their client, or advised or assisted the client to do (or to fail to do) the act, and in doing so acted with the intention of bringing about a loss of tax revenue (see CH176520: what is sanctionable conduct).

If we determine that the tax adviser is responsible for the act (or omission), then there will be attributable potential lost revenue which must be used to determine the penalty amount for sanctionable conduct.

To determine the amount of the potential loss of revenue, we must calculate it using the relevant mechanism in the taxpayer penalties legislation – Schedule 24 to the Finance Act 2007 for inaccuracies, Schedule 41 to the Finance Act 2008 for failures to notify, or Schedule 55 to the Finance Act 2009 or Schedule 25 to the Finance Act 2021 for failures to make returns. Refer to other guidance (CH60000, CH70000, CH80000) for assistance with this.

FA07/SCH24/PARA 1, 5-8

FA08/SCH41/PARA 1, 7-11

FA09/SCH55/PARA 1, 24

FA21/SCH25/PARA 1, 11

FA12/SCH38/PARA 26C