What penalty does section 257EF of the Income Tax Act 2007 impose?

Section 257EF imposes a penalty of up to £3,000 on a company that issues a fraudulent or negligent compliance certificate or compliance statement under the Seed Enterprise Investment Scheme. The same penalty applies where a compliance certificate is issued in contravention of the conditions in section 257EC(3) or (4). The penalty is imposed on the company itself.

What circumstances trigger a penalty under section 257EF?

A penalty arises in two situations: first, where a company issues a compliance certificate or statement prepared fraudulently or negligently; second, where a compliance certificate is issued in contravention of the conditions in section 257EC(3) or (4). Fraud involves deliberate misrepresentation, while negligence involves failure to take reasonable care in preparation.

Is the £3,000 penalty under section 257EF a fixed amount?

No. The £3,000 figure is a maximum cap rather than a fixed amount. HMRC may impose a lesser penalty depending on the circumstances of the breach. The same maximum of £3,000 applies regardless of whether the breach results from fraud, negligence, or a contravention of the issuing conditions under section 257EC.

Who is liable for the penalty under section 257EF?

The penalty under section 257EF is imposed on the issuing company itself, not on individual officers, directors, or shareholders. If a company negligently or fraudulently issues SEIS compliance certificates or statements, it is the company that faces the financial penalty of up to £3,000 from HMRC.

Income Tax Act 2007 section 257EF

Penalties for fraudulent certificate or statement etc

Section 257EF imposes a financial penalty on a company that issues a compliance certificate or compliance statement under the Seed Enterprise Investment Scheme (SEIS) in circumstances where the certificate or statement is fraudulent, negligent, or issued in breach of the required conditions.

A company that issues a fraudulent or negligent compliance certificate or compliance statement faces a penalty of up to £3,000
The same penalty applies where a compliance certificate is issued in breach of the conditions set out in section 257EC(3) or (4)
The penalty is imposed on the issuing company itself, not on individual officers or shareholders
The maximum penalty of £3,000 applies regardless of whether the breach was due to fraud or negligence

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