Tax Glossary

Failure to Notify

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Last updated on:
March 17, 2024

The Failure to Notify penalty is essentially HMRC's way of penalising individuals or businesses that don't inform them about tax-relevant changes or income sources. This could apply to a range of situations, from starting a new business to selling a property at a profit. The core principle is that taxpayers have a responsibility to keep HMRC informed about any changes that could affect their tax liability.

The examples provided illustrate typical scenarios where one might incur a Failure to Notify penalty:

  • When self-employed income surpasses £85,000, necessitating VAT registration.
  • Earning over £1,000 from self-employment, requiring notification within six months of the tax year's end.
  • Selling a second property for profit, which requires informing HMRC within 30 days to pay any due Capital Gains Tax.

The severity of the penalty hinges on the tax amount at stake and the taxpayer's willingness to cooperate. Deliberate concealment of income could see penalties skyrocket to 100% of the owed tax. Furthermore, these penalties come in addition to any other fines associated with late filing or payment, compounded by interest.

It's critical for taxpayers to understand that HMRC does consider "reasonable excuses" for failure to notify, such as severe illness or bereavement. This means that if you find yourself facing a penalty but had genuine, significant reasons for the oversight, you can appeal for a reduction or cancellation of the penalty through the official government portal.

This system underscores the importance of timely communication with HMRC regarding any changes to your financial situation that might impact your tax obligations. Staying proactive not only helps avoid penalties but also ensures that you remain compliant with UK tax laws.

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