Penalties: Late Filing

: Last Updated: 07 November 2019

Late returns can be subject to a mix of fixed and tax geared penalties. What penalties apply for late filing? Which penaly 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 filing deadlines remain unchanged.

The regime was rolled out gradually as follows:

Return	Sch 55 regime applies from	Old rules apply to returns including
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	2009/10 subject to transitional measures
ATED	1 April 2013	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

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 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: 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 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? TBA 2021?

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, have been dropped following budget 2018. HMRC have said that they will instead be included in a future finance bill.

The new system is expected to be effective from some time in 2021: