UK Firms Face New Penalty Under Finance Act

by Robin Pilgrim, LawAndTax-News.com, London

28 July 2004

Following the granting of Royal Assent with regard to the Finance Act last Thursday, it has emerged that UK firms face a new penalty regime if they fail to notify the Inland Revenue within three months of commencing trading.

In addition to new businesses, the rules will also apply to overseas firms which become resident in the United Kingdom, and firms which have been dormant but recommence trading or making investments. Additionally, a notification must be made to the Inland Revenue when a new company acquires a source of investment, income, or trading.

Speaking to AccountingWeb earlier this week, Grant Thornton tax partner, Clare Hartnell explained that:

"Although the self-employed have had to meet these requirements for over three years, now for the first time, companies must provide notification when they commence to trade under this year's Finance Act. Failure to do so will result in a hefty penalty."

Firms which fail to contact the tax authority within the specified time limit will receive an initial fine of £300, followed by a £60 penalty for every day that they fail to notify the Inland Revenue that they have commenced trading.

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