CH62020 - Penalties for failure to file on time: types of penalties for failure to file on time: overview

There is a range of penalties for failing to file a return or other document on time. The type of penalty for failing to file on time depends on

  • the tax to which the return relates, and
  • by how long the return or other document is late.

There are currently four penalty models:

  1. Occasional returns and returns for periods of 6 months or more. Currently the legislation applies to returns required for
  • Income Tax (excluding PAYE returns)
  • Capital Gains Tax
  • Bank Payroll Tax
  • the Registered Pension Scheme
  • Annual tax on Enveloped Dwellings, and
  • Stamp Duty Reserve Tax .

See diagram (Word 29kb) for model 1.

  1. CIS returns - covers returns required under the Construction Industry Scheme (CIS).

See diagram (Word 29kb) for model 2.

  1. Returns for periods between 2 and 6 months. Currently the legislation only applies to returns required for Machine Games Duty, Soft Drinks Industry Levy and Plastic Packaging Tax.

See diagram (Word 29kb) for model 3.

  1. PAYE Real Time Information returns.

See diagram (word29kb) for model 4.

The guidance covers the four penalty models separately.

  • For occasional returns and returns for periods of 6 months or more, see CH62050+.
  • For CIS returns, see CH62300+.
  • For returns for periods between 2 and 6 months, see CH62700+.
  • PAYE Real Time Information returns, see CH62800+.

Initial fixed penalties

For the first three penalty models a person becomes liable to an initial fixed penalty of £100 when their return or other documents are not filed by the filling date for

  • occasional returns and returns for periods of 6 months or more, see CH62100
  • CIS returns, see CH62340, and
  • returns for periods between 2 and 6 months, see CH62720.

If during a tax month an employer fails to file one or more RTI returns by the filing date they will be liable to one penalty for that tax month. The amount of the penalty varies depending on the number of employees within the PAYE scheme, see CH62840.

Further fixed or daily penalties

After the initial fixed penalty the four penalty models differ.

  1. Occasional returns and returns for periods of 6 months or more. If the person has still not filed the return or other document, or otherwise remedied the failure, 3 months after the penalty date, they can incur a daily penalty of £10 a day for up to 90 days starting from 3 months after the penalty date.
  2. CIS returns. A person is liable to a second fixed penalty of £200 if they have still not filed the return or other document, or otherwise remedied the failure, 2 months after the penalty date.
  3. Returns for periods between 2 and 6 months. There are no further fixed penalties or daily penalties. However, if the person defaults with a subsequent return within 12 months of the first default, they will incur a larger fixed penalty on that failure.
  4. PAYE Time Information returns. There are no further fixed penalties or daily penalties. However if the failure continues beyond the period of 3 months beginning with the day after the filing date and the employer has not reported all the outstanding payments on a later return HMRC may charge the employer a further penalty for the ‘extended failure’ - see CH62880. The penalty is 5% of any liability to make payments which should have been shown on the missing return.

6 month further penalties

If the failure continues 6 months after the penalty date, under all penalty models the person will incur a further penalty that is based on a percentage of the tax liability that would have been shown in the return or other document. For the first three penalty models the penalty is the greater of

  • 5% of the tax liability which would have been shown in the return, and
  • £300.

There are no 6 month further penalties for outstanding PAYE Real Time Information returns.

12 month further penalties

For the first three penalty models, so not including PAYE Real Time Information returns, if the failure continues 12 months after the penalty date a minimum penalty is chargeable that is the greater of

  • 5% of the tax liability that would have been shown in the return, and
  • £300.

However, higher behavioural penalties can instead be charged where

  • by failing to file the return by the filing date, or at all, the person deliberately withheld information, and
  • the information withheld would enable or assist HMRC assessing the person’s correct tax liability.

This is the only penalty for failing to file a return or other document that considers the person’s behaviour that led to their failure. The amount of the penalty depends on whether the information was

  • deliberately withheld and concealed,
  • deliberately withheld but not concealed, or
  • not deliberately withheld.

There are different minimum penalties for CIS returns, see CH62300+. The nature and quality of a disclosure also affects the penalty percentage where the person deliberately withheld information.

There are no 12 month further penalties for outstanding PAYE Real Time Information returns.

Offshore matters

Higher maximum penalty percentages may apply after 12 months if the outstanding return is for income tax or capital gains tax and involves an offshore matter.

All penalties

A person becomes liable to the further or daily penalties even if we have not charged some or all of the previous penalties. For example, a person becomes liable to the penalty after 6 months even if we have not charged daily penalties.

FA09/SCH55

FA10/SCH10