What penalties apply if tax is paid late? What are late payment penalties? Can you appeal late payment penalties?
This is a freeview 'At a glance' guide to penalties for late payment of tax.
- Subscribers see Penalties: Late Payment (Subscriber guide)
At a glance
If tax is paid late, HMRC can charge a penalty for failure to make payments on time.
Late payment penalties under schedule 56 FA 2009 apply in respect of the following taxes:
- Pay As You Earn (PAYE)
- National Insurance Contributions (NICs)
- Construction Industry Scheme (CIS)
- Income Tax (IT)
- Capital Gains Tax (CGT)
- Annual Tax on Enveloped Dwellings (ATED)
- Diverted Profits Tax (DPT)
- Accelerated Payment Notices (APNs)
Penalties are set as follows:
| Late payment | Penalty |
| 30 days late | 5% of tax outstanding at that date |
| 6 months late | 5% of tax outstanding at that date |
| 12 months late | 5% of tax outstanding at that date |
Time to pay agreements
- If the taxpayer makes a time to pay agreement with HMRC, the penalty is suspended.
- The taxpayer will become liable to the penalty if the agreement is broken.
Special reduction
- HMRC has a statutory requirement to consider whether any special circumstances exist and if so it may override the statutory penalties and reduce them as it sees fit.
- If HMRC fails to consider special circumstances then its decision is 'flawed'.
- If there is no evidence of HMRC considering any special circumstances a taxpayer may also appeal against the penalties on the basis that its decision to charge penalties is flawed.
- A tribunal may then consider whether to reduce the penalties. However, it can only make a reduction where special circumstances exist.
- 'Special circumstances' mean uncommon, exceptional, abnormal or unusual circumstances.
Appeal
Sch 56 FA 2009 provides for the appeal process and it is advisable first off to ensure that any penalty charged has been made correctly according to the legislation.
- The taxpayer has 30 days to lodge an appeal with HMRC against a tax penalty.
- A late appeal may be accepted at the discretion of HMRC or the tribunal judge.
See: How to appeal a tax penalty and Appeals: Grounds for appeal toolkit for detailed guidance and hints and tips.
Recent changes
Covid-19 measures: see COVID-19 Tracker
Other changes in 2021-22 and earlier: see Late Filing Penalties: Subscriber guide
Small print
Legislation: Schedule 56 FA 2009
Are you enjoying our content?
Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.
Register with us now to receive our receive our FREE SME Topical Tax Update & newletter.
