IPTM7260 | Chargeable Events: disclosures

Chargeable events disclosures

Insurers or their tax representatives (referred to as “institutions” in this guidance) are required to deliver chargeable event certificates to both HMRC and policyholders within certain time limits (s552-552B ICTA88).

Where the deadline is missed or the chargeable event certificate is incorrect, the institution should make a disclosure to HMRC by emailing [email protected].

In dealing with the disclosure, HMRC will need to consider the penalty position. It would therefore be helpful if the disclosure included the following information:

• the nature of the issue

• what caused it

• how it was identified

• what steps have been taken to prevent the issue reccurring

• the number of late, missing or incorrect chargeable event certificates

• the date each late, missing or revised certificate was sent to impacted policyholders

• for institutions that do not intend to settle the tax and interest on behalf of impacted policyholders, a statement to confirm that the late, missing or revised chargeable event certificates have been sent to HMRC as detailed below. The format in which these should be provided depends on how the institution normally reports chargeable event gains to HMRC (see below).

Where chargeable event gain information is normally reported to HMRC by email

Where the institution normally provides HMRC with copies of certificates by email, and it identifies that a certificate was late, missing or incorrect, a copy of the late, missing or revised certificate should be sent to HMRC with a PDF attachment to [email protected]. Where a revised certificate is sent, please also provide a copy or details of the certificate that was incorrect.

Where chargeable event gain information is normally reported to HMRC by post

Where the institution normally provides HMRC with copies of certificates by post, and it identifies that a certificate was late, missing or incorrect, a copy of the late, missing or revised certificate should be sent to the appropriate address below. Where a revised certificate is sent, please also provide a copy or details of the certificate that was incorrect.

UK insurers

HMRC - UK Chargeable Events
RIS COIR Production
Floor 7
1 Atlantic Square
Glasgow
G2 8HS

Non-UK insurers

HMRC - Offshore Chargeable Events
RIS Offshore
SO842
Benton Park View
Newcastle Upon Tyne
NE98 1ZZ

Where chargeable event gain information is normally reported to HMRC using flat text file or a chargeable events spreadsheet

Late or missing certificates

Where the institution normally reports chargeable event gains to HMRC using flat text file or a chargeable events spreadsheet, and it identifies that a certificate was issued late or is missing, it should still report the chargeable event gain in the usual way (that is, by submitting the flat text file or spreadsheet via the Secure Data Exchange Service or emailing [email protected]). This should be done as early as possible, without waiting to add the details of the gain to the next annual submission. Please make it clear that the submission is additional data.

Incorrect certificates

Where the certificate issued was incorrect, the institution should not be making a further submission via SDES or emailing [email protected]. In these cases, the institution should contact [email protected] prior to submitting their data who will advise what actions are required.

Settling the tax and interest on behalf of impacted policyholders

Where the institution wishes to pay any additional tax and interest due on behalf of the impacted policyholders, it would be helpful for the disclosure to state this. In that case, the disclosure should include copies of the missing or original and revised certificates, or all the details that would have been included on those certificates. This is instead of sending the certificates by email or post or submitting a flat text file or spreadsheet as detailed above. To allow HMRC to consider the settlement it would be helpful if the disclosure included a calculation of what the underpaid tax is likely to have been, along with an explanation of how the figure was arrived at. Generally, it should be assumed that the affected policyholders are all higher rate taxpayers, with the underreported gains on foreign policies chargeable to tax at 40% and gains on UK polices chargeable to tax at 20%, due to the policyholder basic rate tax credit. If a different split between basic, higher and additional rate taxpayers across the affected policyholder population is proposed, the rationale for this should be clearly set out.

HMRC will then work with the institution to enter into a settlement to take account of the potential income tax lost by reason of an incorrect, missing or late chargeable event certificates.

Note that in all circumstances where the institution offers to settle the additional tax liability on behalf of impacted policyholders, interest on the quantified tax loss will always be included within the settlement.

Penalties

HMRC will always consider penalties, regardless of whether the institution wishes to pay the tax and interest due on behalf of the impacted policyholders.

Penalties for late or missing chargeable event certificates

Where an institution fails to issue a chargeable event certificate to the policyholder within the relevant three-month period set by s552(1)(a) ICTA88, it is liable to an initial maximum penalty of £300 under s98(1)(i) Taxes Management Act 1970 (TMA70).

If the institution still fails to issue the chargeable event certificate to the policyholder after the initial penalty, then it becomes liable to continuing penalties of up to £60 for each day that the failure continues, under s98(1)(ii) TMA70.

Where an institution fails to issue a chargeable event certificate to HMRC within the relevant three-month period set by s552(1)(b) ICTA88, it is liable to an initial maximum penalty of £300 under s98(1)(i) TMA70.

If the institution still fails to issue the chargeable event certificate to HMRC after the initial penalty, then it becomes liable to continuing penalties of up to £60 for each day that the failure continues, under s98(1)(ii) TMA70.

Penalties for incorrect chargeable event certificates

Where an institution fraudulently or negligently issues an incorrect chargeable event gain certificate, it is liable to a maximum penalty of £3,000, under s98(2) TMA70.

Penalties reduction

After discussion with the institution involved, where it is considered that a penalty is appropriate, HMRC will consider abating the penalty potentially chargeable. Such abatement of s98 penalties will follow the HMRC Policy for Abatement that applies to tax-geared penalties charged under TMA70. This Policy awards reduction for:

• Telling - Maximum 30%

• Helping - Maximum 40%

• Giving access - Maximum 30%

Guidance on this abatement policy can be found in HMRC’s Compliance Handbook at CH82400 onwards.

Queries

For queries regarding the practicalities of making a disclosure or settling the tax on behalf of impacted policyholders, please email [email protected].

Further information

Information on ways in which institutions can deliver chargeable event gain data to HMRC can be found at https://www.gov.uk/guidance/reporting-of-chargeable-event-gains-life-insurance-policies.