The Income Tax Act 2010 incorporates an extensive range of penalties and surcharges. Under the previous Income Tax Act — which applies to periods up to 31 December 2010 — surcharges generally applied only to amounts assessed by the Commissioner of Income Tax remaining unpaid after the due date given on the assessment. For periods from 1 January 2011 onward, surcharges also apply to the non-payment or late payment of any amount that should have been paid by a due date under self-assessment.
The Commissioner has the power, in their absolute discretion, to waive, reduce or discharge any penalty (as opposed to surcharge) incurred if they are satisfied that the act or failure to act, which triggered the penalty, was purely inadvertent.
Circumstances in which penalties and surcharges apply include the following:
Late payment of tax will result in a surcharge of 10% of the tax payable on the day immediately after it is due. After 90 days, there is a further surcharge of 20% of the amount unpaid (tax plus initial surcharge).
If a company does not file a complete tax return (which includes accounts and, if applicable, a P8 reconciliation) within the deadline, then it is liable to a penalty of £50. If the failure continues for three months, then there is a further penalty of £300, with a further £500 penalty payable if the failure continues for a further three months.
If an individual fraudulently, recklessly or negligently delivers an incorrect return or incorrect accounts, information, statement or declaration in connection with the ascertainment of the taxation to which they are subject to, they will be liable to a penalty of up to 150% of the difference between the amount of tax due and that which they have declared. In calculating the penalty percentage to be applied, the Commissioner will take into account the amount of tax lost, the gravity of the offence (innocent error, negligence, recklessness or deliberate omission) and the degree of cooperation afforded by the taxpayer during the investigation.
It is an offence for an individual to knowingly get involved in fraudulent evasion of income tax, whether alone or with another individual. If found guilty of such an offense, the individual will be liable, on summary conviction, to imprisonment for up to six months or a fine, or both and on conviction on indictment to imprisonment for up to seven years or a fine, or both. The individual may request the Commissioner of Income Tax to issue a compounding order before the court hearing, provided they admit in writing that they committed the offense, settle the amount due (including penalties, surcharges and interest) and consent that full details of the compounding order will be published in the Gibraltar Gazette.
There is a tax amnesty in respect of funds sent abroad on which tax should have been paid in Gibraltar. The amnesty applies to funds which are remitted to and deposited in Gibraltar, or to the value of any assets purchased abroad from the proceeds of such funds. A tax rate of 7.5% is payable under the amnesty. The amnesty lasts for six months from midnight on 5 July 2016.
If a company fails to pay to the Commissioner any PAYE or social insurance that has been or should have been withheld or collected by the due date, then any director or shadow director of that company is committing an offense and is subject to the same penalties as individuals who are knowingly concerned in evasion of income tax (see above). However, there is no requirement that the compounding order be published in the Gibraltar Gazette unless tax evasion is involved.
If an individual fails to pay PAYE or social insurance that has been deducted or should have been deducted and if the amount payable has been outstanding for three months or more and amounts to more than £5,000, then the Commissioner can publish details of the offense and of the offender in the Gibraltar Gazette. However, the Commissioner must first provide a 14-day written notice to the offender of the intention to “name and shame.”
An individual who fails to notify the Commissioner of reportable tax planning arrangements (as defined in Section 41 of the act — see Section 5.18) will be liable to a fine and/or imprisonment.
An individual who does not comply with a request for information (in connection with their tax affairs or those of other persons) by the Commissioner of Income Tax by the due date, will be liable to a fine and/or imprisonment.