Income Tax (Earnings and Pensions) Act 2003 section 28F-28I

Enquiries into CSOP schemes

Sections 28F to 28I set out the rules governing HMRC's power to enquire into Company Share Option Plan (CSOP) schemes, the procedures for completing enquiries, and the penalties and consequences that apply where a scheme fails to meet the required conditions.

• HMRC may open an enquiry into a CSOP scheme by giving notice to the scheme organiser, generally by 6 July following the tax year in which the initial notification deadline falls, within 12 months of receiving a self-certification declaration, or at any time if they have reasonable grounds to believe the scheme requirements are not or have not been met
• An enquiry is completed when HMRC issue a closure notice, and the scheme organiser may apply to a tribunal for a direction requiring HMRC to close the enquiry within a specified period if there are no reasonable grounds for delay
• Where HMRC find that scheme requirements are not met and the breach is serious, the scheme loses its CSOP status (potentially backdated) and the organiser faces a penalty of up to twice HMRC's reasonable estimate of the unpaid income tax and National Insurance contributions resulting from the scheme's favourable status
• Where the breach is less serious, the organiser faces a penalty of up to £5,000 and must rectify the non-compliance within 90 days; failure to do so results in a default notice removing the scheme's CSOP status and a further penalty of up to twice the estimated unpaid tax and National Insurance contributions