Good evening, Ed.
In many countries the law not only requires that you must register to vote, but that you must also actually vote. So UK law is far less strict than in several other places.
If you don't respond for the first letter, you'll be sent a series of reminders, so the "I never received it" response won't work.
Do people get prosecuted? Yes, of course they do:
http://www.scarborough.gov.uk/default.aspx?pag e=14346
It's also worth remembering that you'll find it incredibly difficult (if not impossible) to get credit if your name isn't on the electoral roll. If you have to claim any benefits, such as Job Seeker's Allowance, you're likely to experience delays in payments if your name isn't there. And if you get questioned by the police (even though you might be totally innocent) you might have to be taken to a police station, while your identity is checked, if there's no record of you on the roll.
Chris