Guidance

Penalties for failure to file returns on time — Machine Games Duty, Soft Drinks Industry Levy and Plastic Packaging Tax — (CC/FS18c)

Updated 10 November 2023

This factsheet tells you about the penalty percentage that we may charge if your return is more than 12 months late. The penalty percentages and penalty rules apply to the following returns starting on or after:

• 1 February 2013 for Machine Games Duty (MGD)
• 6 April 2018 for Soft Drinks Industry Levy (SDIL)
• 1 April 2022 for Plastic Packaging Tax (PPT)

This factsheet does not apply to VAT. For details about the VAT default surcharge, go to GOV.UK and search ‘apply default surcharge’.

This factsheet is one of a series. For the full list, go to GOV.UK and search ‘HMRC compliance checks factsheets’.

If you need help

If you have any health or personal circumstances that may make it difficult for you to deal with us, please tell the officer who contacted you. We’ll help you in whatever way we can. For more information, go to GOV.UK and search ‘get help from HMRC if you need extra support’.

When we will not charge you a penalty

We will not charge you any penalties for failing to file your return on time if we agree that you had a reasonable excuse. This is provided you filed your return without delay once the reasonable excuse had ended.

A reasonable excuse is something that stopped you from meeting a tax obligation on time, which you took reasonable care to meet. It might be due to circumstances outside your control or a combination of events. Once the reasonable excuse has ended, you must put things right without any unnecessary delay.

Whether you have a reasonable excuse depends upon the circumstances of the failure to meet the obligation and your situation and abilities. This may mean that what is a reasonable excuse for one person may not be a reasonable excuse for someone else. If you think you have a reasonable excuse, please tell us. If we’ve already charged a penalty, we’ll cancel it.

If there was anything about your health or personal circumstances that made it difficult for you to file your returns on time, please tell the officer carrying out the check. Telling them will mean that they can take this into account when considering whether you had a reasonable excuse.

Penalties we may have already charged

If you did not file your return on time, we may have already charged you the following penalties.

1. An ‘initial penalty’ of between £100 and £400 on the day after the date your return was due. The amount we’ve charged will depend on how many returns you’ve previously filed late.
2. A ‘further penalty’ of £300 or 5% of the liability in the return (whichever was the higher), after your return was 6 months late.

When a return has not been filed, we can estimate the liability in the return. If we do this, the penalty charged at 6 months will be 5% of the estimated liability.

When the return is filed, the 6-month penalties will automatically be re-calculated if the liability in the return is different from our estimate.

Penalty we will charge if your return is 12 months late

We will charge you a second ‘further penalty’ of £300 or 5% of the liability in the return (whichever is the higher), after your return is 12 months late. We’ll do this unless, by failing to file your return within 12 months, you:

• withheld information
• knew that the information would help us to work out the correct liability

In these cases, we can charge a penalty of up to 100% of your liability. We explain how we work out the penalty percentage later in this factsheet.

During our check we’ll look into whether you’ve withheld information and if so, the reason why. We call this reason the ‘behaviour’. We also explain the different behaviours later in this factsheet.

Telling us about information you’ve withheld

If you know that you’ve withheld information, you should tell us straightaway. If you tell us before you had any reason to believe that we were about to find out about it, we call this an ‘unprompted disclosure’. If you tell us at any other time, we call it a ‘prompted disclosure’.

The penalty percentage rate for unprompted disclosures will be lower than for prompted disclosures.

How you can reduce any increase to the second further penalty

If we decide that you withheld information, we can reduce the amount of any increase to the second further penalty. This will depend on our view of how much assistance you gave us when you make a disclosure. We refer to this assistance as the ‘quality of disclosure’ or as ‘telling, helping and giving’.

Examples of making a disclosure include:

• telling us about, or agreeing that you withheld information
• telling us everything you can about the information that was withheld as soon as you can
• helping us to work out any liability to MGD, SDIL or PPT by using your own records
• helping us to understand your figures or records
• telling and helping us by answering our questions in full
• giving us access to your records by sending us your return and any other documents we need to accurately work out the correct liability to MGD, SDIL or PPT

We’ll reduce the penalty by the maximum amount possible when we work out the higher second further penalty, if you:

• tell us everything you can about any withheld information as soon as you know about it, or you believe we’re about to find it
• do everything you can to help us correct it

If you delay in making a disclosure, you may still be entitled to a reduction, but it will be smaller. If we do not need any extra assistance from you, we’ll give you some reduction for telling, helping and giving.

Letting us know about any special circumstances

If there are any special circumstances that you believe the officer dealing with the check should consider when working out the penalty, you should let them know straightaway.

How we work out the amount of any increase to the second further penalty percentage rate

There are 8 stages in working out the amount of the increased penalty percentage. Each stage is explained in more detail below.

1. Working out the liability

The penalty is a percentage of the duty that should have been shown on the return. The officer dealing with the check will explain how this is worked out.

2. Determining our view of the ‘behaviour’

If a return is more than 12 months late, we need to find out the reason why. We refer to this reason as the ‘behaviour’. The type of behaviour will determine whether we increase the percentage rate of the second further penalty.

There are 3 types of behaviour.

Non-deliberate

This is where you did not know that, by failing to file the return on time, information was being withheld from us that would help us to work out the correct liability. In these cases, we will not carry out stages 3 to 8 below. This is because the penalty is a fixed 5% of your liability or £300, whichever is higher.

Deliberate

This is where you knew that, by failing to file the return on time, information was being withheld that would help us to establish the correct liability.

Deliberate and concealed

This is where you knew that information was being withheld that would help us to establish the correct liability and you took additional steps to conceal this. This is the most serious type of failure and carries the highest penalties.

3. Deciding whether there was an unprompted or prompted disclosure

This determines the minimum penalty percentage that we can charge. We explain this in more detail above, in the section ‘Telling us about information you’ve withheld’.

4. Deciding the range that the increased penalty percentage rate falls within

The increased penalty percentage rate depends on whether the behaviour was ‘deliberate’ or ‘deliberate and concealed’ and on whether the disclosure was ‘prompted’ or ‘unprompted’. The following table shows the penalty ranges that apply.

Type of behaviour	Unprompted disclosure	Prompted disclosure
Deliberate	20% to 70%	35% to 70%
Deliberate and concealed	30% to 100%	50% to 100%

5. Working out the reductions for the quality of disclosure

The quality of disclosure (also known as ‘telling, helping and giving’), determines where the penalty will fall within the penalty range. The reduction we give depends on how much assistance you give us. For:

• telling — we give up to 30%
• helping — we give up to 40%
• giving access to records — we give up to 30%

When we work out the quality of disclosure, we’ll also consider how long it’s taken you to tell us about the information you withheld. If it’s taken you a long time to tell us, (for example, 3 years or more), we’ll usually restrict the maximum reduction we give for the quality of disclosure. We’ll usually restrict this to 10 percentage points above the minimum of the penalty range. This means you will not benefit from the lowest penalty percentage that’s normally available.

6. Working out the increased penalty percentage rate

The increased penalty percentage rate is determined by the penalty range and the reduction for the quality of disclosure.

Example

A registered person admitted that they had deliberately withheld the information about their liability to MGD, SDIL or PPT by failing to file the return on time. The amount due on the return is £10,000. This was a prompted disclosure.

The penalty range for deliberate behaviour with a prompted disclosure is 35% to 70% of the liability that should have been shown on the return.

The reduction for quality of disclosure (telling, helping and giving) was 100%.

Steps	Calculation example
To work out the penalty percentage rate, we first work out the difference between the minimum and maximum penalty percentages.	70% minus 35% = 35
We then multiply that figure by the reduction for quality of disclosure to arrive at the percentage reduction.	35 × 100% = 35%
We then deduct the percentage reduction from the maximum penalty percentage we can charge.	70% – 35% = 35%
This gives us the penalty percentage rate.	35%

7. Working out the amount of the second further penalty

To work out the amount of the second further penalty, we multiply the liability by the penalty percentage rate. See the example above.

Using the example above, the liability is £10,000 and the increased penalty percentage rate is 35%. This means that the amount of the second further penalty is £3,500.

8. Considering other reductions

After working out the amount of the penalty, we take into account any other reductions that are necessary. For example, where we’ve already charged another penalty or surcharge on the same duty. This then gives the amount of penalty that we’ll charge.

How we tell you about the second further penalty

We’ll write to tell you how much the second further penalty is and how we’ve worked it out. If there’s anything about the penalty that you do not agree with, or if you think there’s any information that we’ve not already taken into account, you should tell us straightaway. After taking account of anything you’ve told us, we’ll send you a penalty assessment notice.

If you’ve deliberately done something wrong

We may carry out a criminal investigation with a view to prosecution if you’ve deliberately done something wrong. For example:

• giving us information that you know is not true, whether verbally or in a document
• dishonestly misrepresenting how much tax you owe, or claimed payments you’re not entitled to

Managing serious defaulters

If you deliberately got your tax affairs wrong, and we find this during the check, we may monitor your tax affairs more closely. We have an enhanced monitoring programme called ‘managing serious defaulters’. For more information, read factsheet CC/FS14, ‘Managing serious defaulters’. Go to GOV.UK and search ‘CC/FS14’.

What to do if you disagree

If there’s something that you do not agree with, please tell us.

If we make a decision that you can appeal against, we’ll write to you about the decision and tell you what to do if you disagree. You will usually have 3 options. Within 30 days, you can:

• send new information to the officer you’ve been dealing with and ask them to take it into account
• have your case reviewed by an HMRC officer who has not been involved in the matter
• arrange for an independent tribunal to hear your appeal and decide the matter

Whichever you choose, you may also be able to ask for an HMRC specialist officer to act as a neutral facilitator to help resolve the dispute. We call this Alternative Dispute Resolution (ADR).

ADR is only available for disputes that relate to specific tax areas. The officer dealing with the check will tell you if ADR is available for your dispute. For more information about appeals and ADR, read:

• HMRC1, ‘How to get a review of an HMRC decision’
• factsheet CC/FS21, ‘Alternative dispute resolution’

Go to GOV.UK and search ‘HMRC1’ or ‘CC/FS21’.

Your rights if we’re considering penalties

The European Convention on Human Rights gives you certain important rights. If we’re considering penalties, we’ll tell you. We’ll also tell you that these rights apply and ask you to confirm that you understand them. These rights are that:

• if we ask you any questions to help us decide whether to charge you a penalty, you have the right not to answer them — the amount of help that you give us when we’re considering penalties is entirely a matter for you to decide
• when deciding whether to answer our questions, you may want to get advice from a professional adviser — particularly if you do not already have one
• if you disagree with us about the tax or any penalties we believe are due, you can appeal — if you appeal about both tax and penalties, you have the right to ask for both appeals to be considered together
• you have the right to apply for funded legal assistance for dealing with any appeal against certain penalties
• you’re entitled to have the matter of penalties dealt with without unreasonable delay

You can find full details about these rights in factsheet CC/FS9 ‘The Human Rights Act and penalties’. Go to GOV.UK and search ‘CC/FS9’.

Our privacy policy

Our privacy notice sets out the standards that you can expect from us when we ask for information or hold information about you. Go to GOV.UK and search ‘HMRC Privacy Notice’.