INTM251600 | Controlled Foreign Companies: How the corporate tax regime works for CFCs: HMRC enquiries: penalties

For a return or other document which is due to be filed on or after 1 April 2009, relating to a tax period beginning on or after 1 April 2008, FA07/SCH24/PARA1 (penalties for errors) will apply to the CFC supplementary page as it applies to the rest of the return. This renders companies liable to a penalty where they deliver an incorrect return or, on discovering that a return is incorrect, do not remedy the error without reasonable delay. (Returns due to be filed before 1 April 2009 were governed by the previous penalty regime under FA98/SCH18/PARA20.)

The maximum penalty is calculated by applying an appropriate percentage to the potential lost revenue as a result of putting right an inaccuracy. Full details of these penalties are found in the Compliance Handbook.

The imposition of penalties is subject to the oversight of Business, Assets & International Base Protection Policy team. Before a penalty is imposed under FA07/SCH24/PARA1 in respect of a CFC return the following will be taken fully into account:

• the information that should reasonably have been available to the company making the return,

• the understanding of the legislation that might reasonably be expected and

• the company’s justification for taking an alternative interpretation of facts or legislation.