What penalty applies for submitting an incorrect PRT return under the Oil Taxation Act 1975?

Under paragraph 8 of Schedule 2 to the Oil Taxation Act 1975, a person who fraudulently or negligently delivers an incorrect return, account or other document for petroleum revenue tax purposes is liable to a penalty. The maximum penalty equals the difference between the tax that would have been payable on the incorrect figures and the tax actually due on the correct figures.

How is the maximum penalty calculated under OTA 1975 Schedule 2 paragraph 8?

The maximum penalty is calculated as the difference between the petroleum revenue tax that would have been assessed based on the incorrect document and the tax properly chargeable on the correct figures. This means the penalty is capped at the amount of additional tax that would have been lost had HMRC accepted the incorrect information at face value.

How did the Finance Act 2008 change the PRT penalty rules under Schedule 2 paragraph 8?

The Finance Act 2008 Schedule 40 paragraph 21(a) amended paragraph 8 as part of a broader modernisation of penalty rules for inaccuracies in documents. The Finance Act 2008, Schedule 40 (Appointed Day, Transitional Provisions and Consequential Amendments) Order 2009 (SI 2009/571) brought these amendments into force with transitional arrangements for the changeover from old to new penalty rules.

Does the penalty depend on whether the error was fraudulent or negligent?

Yes, the circumstances of the error are relevant. Whether the full penalty is imposed depends on whether the error was made fraudulently (deliberately) or negligently (carelessly), and whether the participator cooperated in disclosing and correcting the error. Deliberate errors are treated more seriously than careless ones under the penalty regime.

Oil Taxation Act 1975 Schedule 2 paragraph 8

Incorrect returns, accounts, etc.

Paragraph 8 of Schedule 2 deals with penalties for submitting incorrect returns, accounts or other documents in connection with petroleum revenue tax.

A person who fraudulently or negligently submits an incorrect return, account or other document for PRT purposes is liable to a penalty.
The maximum penalty is the difference between the tax that would have been payable based on the incorrect document and the tax that is actually due on the correct figures.
The penalty provisions were amended by the Finance Act 2008, which introduced a new regime for penalties for errors in returns and other documents, with transitional provisions brought into effect by statutory instrument in 2009.
These penalty rules apply to all documents delivered to HMRC in connection with petroleum revenue tax obligations under the Oil Taxation Act 1975.

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