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? 

This is a freeview 'At a glance' guide to late filing penalties.

At a glance

The current late filing penalty regime was introduced by section 106 and Schedule 55 of the 2009 Finance Act.

The regime was rolled out gradually as follows:

Return

Sch 55 regime applies
from

Old rules apply 

to returns including

Income Tax 

Capital Gains Tax (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

Online property returns for UK residential property disposals

2020-21 & 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

2009-10

subject to transitional measures

Annual Tax on Enveloped Dwellings (ATED)

1 April 2013

n/a

Soft Drinks Industry Levy 1 April 2019  n/a

 

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
  • Soft Drinks Industry Levy: 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:

  • 100%* / 150%-200%** of tax due, if there is more than one tax geared penalty is charged

12 months late

The greater of 5% of tax due or £300

Subject to special rule which limits to:

  • 100%* / 150%-200%** of tax due, if there is more than one tax geared penalty is charged

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:

  • deliberate and concealed withholding 100% of tax due, or £300 if greater.
  • deliberate but not concealed 70% of tax due, or £300 if greater.

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 Grounds for Appeal: HMRC error or flaw

**Where the late filing relates to offshore income and the territories are listed as either Category 2 or 3, the penalties are increased. For Category 3 territory inaccuracies, penalties can be as much as 200% of the tax. .

See:

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

Penalties for late filing of online property disposal returns

For disposals completing on or after 6 April 2020, gains on UK residential property disposals must now be declared on HMRC's online CGT disposal return, and the tax paid, using the Capital Gains Tax UK property disposal service, within 30 days of completion (60 days from 27 October 2021).

These are also calculated under Schedule 55 (as above):

  • No penalties were charged for late filing before 1 August 2020.
  • It is not yet known whether HMRC will apply the same leniency here for daily penalties as they have for Non-Resident CGT returns (see above).

You can appeal against penalties issued, see Penalties: Grounds for Appeal toolkit and How to appeal a tax penalty (subscriber version)

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 did 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 deadline 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 probably incur a penalty of £400.

For further information on RTI penalites, see Tax Penalties RTI

Penalties for late CIS returns

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:

  • deliberate and concealed withholding maximum of 100% of tax due, or £3,000 if greater.
  • deliberate but not concealed maximum of 70% of tax due, or £1,500 if greater.

12 months: gross paid recipients

Based on behaviour:

  • deliberate and concealed withholding £3,000.
  • deliberate but not concealed £1,500.

 

CIS: failure to register

When the first CIS return of a new contractor is filed, the total penalty for all fixed-penalty defaults in the capping period is capped at a maximum of £3,000. See Penalties: CIS (Construction Industry Scheme) for further detail. 

Offshore income and gains

The 2010 Finance Act modified Sch 55 introducing tougher 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

Soft Drinks Industry Levy

Penalties apply for failure to file returns within 30 days.

They apply to late returns starting with the June 2019 return.

Lateness Penalty
1st Late return in 12 months £100
2nd Late return in 12 months £200
3rd Late return in 12 months £300
4th Late return in 12 months £400
Unfiled within 6 months The greater of £300 or 5% of SDIL due
Unfiled within 12 months

The greater of £300 or a behavioural penalty

of 5%, 70% or 100% of SDIL due

 

See Soft Drinks Industry Levy

All penalties

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 they have a 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


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