Finance Act 2008

Potential lost revenue

7 (1) “The potential lost revenue” in respect of a failure to comply with a relevant obligation is as follows.

(2) In the case of a relevant obligation relating to income tax or capital gains tax and a tax year, the potential lost revenue is so much of any income tax or capital gains tax to which P is liable in respect of the tax year as by reason of the failure is unpaid on 31 January following the tax year.

(3) In the case of a relevant obligation relating to corporation tax and an accounting period, the potential lost revenue is (subject to sub-paragraph (4)) so much of any corporation tax to which P is liable in respect of the accounting period as by reason of the failure is unpaid 12 months after the end of the accounting period.

(4) In computing the amount of that tax no account shall be taken of any relief under subsection (4) of section 419 of ICTA (relief in respect of repayment etc of loan) which is deferred under subsection (4A) of that section.

(5) In any case where the failure is a failure to comply with the obligation under paragraph 2(4) of Schedule 11 to VATA 1994, the potential lost revenue is the value added tax on the acquisition to which the failure relates.

(6) In the case of any other relevant obligation relating to value added tax, the potential lost revenue is the amount of the value added tax (if any) for which P is, or but for any exemption from registration would be, liable for the relevant period (see sub-paragraph (7)), but subject to sub-paragraph (8).

(7) “The relevant period” is—

(a) in relation to a failure to comply with paragraph 14(2) or (3) of Schedule 1 to VATA 1994, paragraph 8(2) of Schedule 3 to that Act or paragraph 7(2) or (3) of Schedule 3A to that Act, the period beginning on the date of the change or alteration concerned and ending on the date on which HMRC received notification of, or otherwise became fully aware of, that change or alteration, and

(b) in relation to a failure to comply with an obligation under any other provision, the period beginning on the date with effect from which P is required in accordance with that provision to be registered and ending on the date on which HMRC received notification of, or otherwise became fully aware of, P’s liability to be registered.

(8) But the amount mentioned in sub-paragraph (6) is reduced—

(a) if the amount of the tax mentioned in that sub-paragraph includes tax on an acquisition of goods from another member State, by the amount of any VAT which HMRC are satisfied has been paid on the supply in pursuance of which the goods were acquired under the law of that member State, and

(b) if the amount of that tax includes tax chargeable by virtue of section 7(4) of VATA 1994 on a supply, by the amount of any VAT which HMRC are satisfied has been paid on that supply under the law of another member State.

(9) In the case of a relevant obligation under any provision relating to insurance premium tax, aggregates levy, climate change levy, landfill tax or air passenger duty, the potential lost revenue is the amount of the tax (if any) for which P is liable for the period—

(a) beginning on the date with effect from which P is required in accordance with that provision to be registered, and

(b) ending on the date on which HMRC received notification of, or otherwise became fully aware of, P’s liability to be registered.

(10) In the case of a failure to comply with a relevant obligation relating to any other tax, the potential lost revenue is the amount of any tax which is unpaid by reason of the failure.