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- Penalties: Late Filing
Penalties & Compliance
- Last Updated: 23 July 2020
Late returns can be subject to a mix of fixed and tax geared penalties. What penalties apply for late filing? Which penalty will apply and when?
At a glance
The current late filing penalty regime was introduced by section 106 and Schedule 55 of 2009 Finance Act.
The regime was rolled out gradually as follows:
| Return |
Sch 55 regime applies |
Old rules apply |
| Income tax and CGT |
2010/11 & later returns (filing from 31/1/2012) |
2009/10 (filing up to 31/1/2011) |
| Non-residents CGT returns | 2015/16 & later returns | n/a |
| Corporation Tax |
Still within Sch 18 FA 1998 rules (para 17 and 18) |
To date |
| PAYE |
6 April 2013 |
2012/13 |
| CIS |
October 2011 |
subject to transitional measures |
| ATED |
1 April 2013 |
Penalties under the Sch 55 penalty regime
Penalties are all charged at the same rate for all the taxes except for:
- PAYE: see below
- CIS: see below
- Offshore income: see below
|
Lateness |
Penalty |
|
Miss filing deadline |
£100 |
|
3 months late |
Daily penalty £10 per day for up to 90 days (max £900) |
|
6 months late |
The greater of 5% of tax due or £300 Subject to special rule which limits to:
|
|
12 months late |
The greater of 5% of tax due or £300 Subject to special rule which limits to:
Special rule also if the taxpayer is held to be deliberately withholding information that would enable HMRC to assess the tax due. |
|
12 months & taxpayer deliberately withholds information |
Based on behaviour:
Reductions apply for prompted and unprompted disclosures and telling, giving and helping. * |
*The penalties for being 6 months late and 12 months late are subject to the interaction rule in para 17(3) and taken together they should not exceed 100% the tax due. See Penalties, Grounds for Appeal, HMRC error.
**Higher penalties apply for returns of category 2 and 3 information.
See:
- Penalties: SA late filing and payment for worked examples.
- Penalties, grounds for appeal: HMRC error for cases on miscalculation of penalties and errors in penalty notice and other failures and cases featuring successful and unsuccessful appeals.
- Penalties: Grounds for Appeal toolkit for other reasons to appeal penalties
Penalties for late filing of Non-Resident CGT returns
These are calculated under Schedule 55 (as above), although subject to special non-statutory transitional provisions:
- No penalties were charged for late filing before 6 May 2016.
- In May 2017 HMRC confirmed that it would not charge daily penalties.
Appeal against NRCGT late filing penalties, see
- Non-Residents CGT returns: Penalties & Appeals
- This note tracks the wide range of different decisions with regards to reasonable excuse for failing to file a return and penalty miscalculation issues.
- Penalties: Grounds for Appeal toolkit
- This takes you step by step through the appeal process.
Penalties for late PAYE returns
Sch 55 penalties were to apply to PAYE from 2013/14.
Under the change over to Real Time Information (RTI) filing, sch 55 does not apply until March 2015.
PAYE late fiing penalty rates
| No of employees | Monthly penalty |
| 1-9 | £100 |
| 10-49 | £200 |
| 50-249 | £300 |
| 250 + | £400 |
This fixed penalty applies to late returns for each month after an employer has notified HMRC of their liability and to months that they have missed before that notification. The first month is excluded for the first failure in a tax year
For PAYE Annual Returns due for 2012/13 the late filing penalty is £100 per month, per 50 employees.
If the filing deadling of 19 May is missed the fine will be £100, even if only a part-month late.
HMRC will not raise a penalty notice until you are four months late, and it will not do this until September, so if you forget to file a return you will be probably incur a penalty of £400.
For further information on RTI penalites, see Tax Penalties RTI
Penalties for late CIS returns
- See also Penalties: Construction Industry Scheme for a detailed break down of old and new and transitional measures
|
Lateness |
Penalty |
|
Miss filing deadline |
£100 |
|
2 months |
£200 |
|
6 months |
5% of tax due or £300, if greater |
|
12 months |
5% or £300 will apply, unless the taxpayer is held to be deliberately withholding information that would enable HMRC to assess the tax due. Reductions apply for prompted and unprompted disclosures and telling, giving and helping |
|
12 months & taxpayer deliberately withholds information |
Based on behaviour:
|
|
12 months: gross paid recipients |
Based on behaviour:
|
CIS: failure to register
When the first CIS return is filed the total penalty for all defaults is a maximum of £3,000 and the tax geared penalties cannot apply.
CIS: late filing transitional measures
HMRC announced that transitional measures applied to certain new contractors who were charged penalties in 2009/10 and 2010/11.
Offshore income and gains
The 2010 Finance Act modified Sch 55 introducing toughter penalties for category 2 and 3 offences (relating to offshore income and gains). The effect is that penalties for inaccuracy increase to 45% for a careless but not concealed error to a maximum of 200%.
See Penalties: Offshore Income, CGT and IHT
Determination of penalty when return is made
HMRC may determine the amount of tax due in order to raise a tax geared penalty. The amount will be re-assessed when the taxpayer makes the return.
Appeal and excuse
No penalty applies where the taxpayer satisfies HMRC or the tribunal on appeal that he has reasonable excuse for the failure.
- Insufficiency of funds or relying on another to do something is not a reasonable excuse.
- Following the end of the reasonable excuse circumstances the failure has to have been remedied without unreasonable delay.
- Proof of posting and other excuses, see Tax penalties: grounds for appeal
Daily penalties
There have been various cases which look at whether penalties have been correctly issued, see Appeals: Grounds for appeal toolkit
What's new?
Coronavirus
In March to June 2020 the government made certain relaxations to the tax payment regime as a result of the coronavirus (COVID-19) pandemic, these include:
- Deferral of Income Tax payments on account due by 31 July 2020 for the 2019/20 tax year under the Self Assessment until the 31 January 2021. No penalties will be charged in the deferral period. See COVID 19: Deferring Income Tax payments
- Time to pay assistance: see COVID-19: Time to Pay
- Appeals: Reasonable excuse: updated guidance on when taxpayers have a reasonable excuse for the late filing of returns or late payment of tax to specifically include being affected by Coronavirus. See Coronavirus is a reasonable excuse
- Appeals: Deadline extended: for appealing tax penalties and decisions from 30 days to up to 3 months where the taxpayer or their business has been affected by COVID-19. See COVID-19: Tax appeal deadlines extended.
Proposed changes to the penalty regime
Measures in Finance Bill 2019 which proposed to replace the schedule 55 FA 2009 regime with a points based system of late filing penalties: designed for Making Tax Digital and to initially apply to Income Tax Self Assessment and VAT, were shelved in Budget 2018. HMRC have said that they will instead be included in a future finance bill.
The new penalty system is expected to be effective from some time in 2022/23 following the revised commencement timetable for Making Tax Digital for Business.
It is anticipated that once the new system is in place, a one year period of grace will apply to MTD filings, as the legislation specifies HMRC can delay to allow for a ‘familiarisation period’
The new system will replace the schedule 55 FA 2009 penalty regime for the relevant returns.
- A point will accrue for each failure to submit on time.
- When the point threshold is reached, a penalty will be charged.
- Points will be reset after a period of good compliance.
See Penalties: Late Submission of regular returns (Making Tax Digital)
