Commentary on Sections Penalties Section 45: Penalties for making prohibited payments
194.Section 45 enables penalties to be imposed on a person who makes repeated prohibited payments from a childcare account or permits such payments to be made. A prohibited payment is defined in section 20.
195.A person will be liable to a penalty if:
	they have caused or permitted a prohibited payment to be made from their childcare account;
	as a result of that prohibited payment, they became liable to repay the top-up amount and have been assessed under section 41;
	HMRC has given them a warning notice under subsection (2); and
	they then cause or permit a further prohibited payment to be made from their childcare account within 4 years of being given the warning notice and are assessed under section 41 as liable to repay the top-up amount.
196.Subsection (2) sets out the conditions that must be met before HMRC can give a warning notice. As set out above, these are that they must have caused or permitted a prohibited payment to be made from their childcare account and have been notified of an assessment under section 41 in respect of that prohibited payment. That assessment must also have become final. An assessment becomes final, under subsection (7), when it can no longer be reviewed or appealed against.
197.Subsections (4) and (5) provide that a warning notice given to a person in respect of prohibited payments ceases to have effect if the person is notified of a penalty under this section, but that HMRC may issue a new warning notice in respect of the prohibited payment to which the penalty applies, thus triggering the start of another 4-year period, and enabling HMRC to issue a further penalty if subsequent prohibited payments are made within this period.
198.Subsection (6) provides that the penalty for prohibited payments will be 25% of the repayable top-up element that has been assessed under section 41. For example, if the prohibited payment was £500 (of which £100 was the top-up element), the penalty would be £25.
199.Subsection (8) provides that if a person has been granted an extension of the time limit for requesting a review of, or appealing against, an assessment under section 41, any warning notice has no effect. This means that a further warning notice would need to be issued before they could be subject to a penalty.