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  • Writer's pictureBrian Pusser

HMRC – Failure to Notify

Updated: Aug 3, 2023

HMRC Updates Fact Sheet on ‘ FAILURE TO NOTIFY’ HMRC has the power to charge employers a penalty if they fail to notify them of changes that alter their tax position. As this is key in relation to COVID-19 support, what do you need to know to avoid trouble?

𝗪𝗵𝗲𝗻 𝗱𝗼 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲 𝘁𝗼 𝗻𝗼𝘁𝗶𝗳𝘆 𝗛𝗠𝗥𝗖? Certain things that happen in the life of a business affect its tax liability. As a result, there is a requirement to inform HMRC within certain time limits. Ignoring this can lead to a potential “failure to notify” penalty. For example, when a business exceeds the VAT registration threshold it has 30 days to inform HMRC. In the context of COVID-19, failing to notify HMRC within 90 days of discovering a mistake in your Coronavirus Job Retention Scheme claim is classed as a potential penalty situation. HMRC has recently updated its fact sheet on failure to notify.

Reasonable excuse HMRC won’t charge a penalty for failure to notify if all of the following conditions are met: you have a reasonable excuse, the failure wasn’t deliberate and as soon as the reasonable excuse ends you tell HMRC what has happened.

But what is a reasonable excuse? It’s where something happened outside your control. Or even a combination of events. And it’s very personal as the loss through illness of a key person in a small business could be very different to that of a member of staff in a large team.

𝗗𝗼𝗻’𝘁 𝘄𝗮𝗶𝘁 𝗳𝗼𝗿 𝗛𝗠𝗥𝗖 If you find there is an issue that should have been notified to HMRC, and you’ve missed a deadline, you should always make what is known as an “unprompted disclosure”. Once HMRC has started a compliance check it’s much more difficult to make an unprompted disclosure. The fact that the check has started is in itself a prompt. So you’ll only get the lower penalty that can be offered for unprompted disclosures if what you’re telling HMRC is unrelated to the issue it is investigating. Or it was highly unlikely to find the issue during the current compliance check.

𝗧𝗲𝗹𝗹𝗶𝗻𝗴, 𝗵𝗲𝗹𝗽𝗶𝗻𝗴 𝗮𝗻𝗱 𝗴𝗶𝘃𝗶𝗻𝗴 What you do after you have made the disclosure also has an impact, and this is what HMRC refers to as the “quality of the disclosure”. The more you co-operate with HMRC, the more the penalty can be reduced. You can co-operate by: telling HMRC everything about why the failure occurred and answering its questions; replying quickly and explaining the information you’re supplying; and giving it access to any requested documents promptly.


The higher the quality of the initial disclosure the more likely it is that you’ll get an immediate full penalty reduction. It can therefore be worth engaging an advisor who specializes in disclosures.


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