DST65380 - Tax-Related Late Filing Penalties
If a Responsible Member fails to deliver a DST tax return for an accounting period within 18 months after the end of the accounting period, then it is liable to a tax-related penalty in addition to the flat rate penalty.
The amount of the penalty is:
- 10% of the tax unpaid if the return is delivered within two years after the end of the accounting period,
- 20% of the tax unpaid in any other case.
The unpaid tax is the amount of the tax payable by the members of the group for the accounting period that remains unpaid on the date that the Responsible Member first incurs a tax-related penalty.
Example 2
This example shows a tax-related penalty in a straightforward case when return is delivered within two years after the end of the accounting period:
| DST return required | Accounting period ended 30 September 2020 |
|---|---|
| Filing date | 30 September 2021 |
| Return filed | 1 May 2022 (more than 18 months after the end of the accounting period) |
| Unpaid tax at 1 April 2022 (30.9.20 + 18 months + 1 day) = | £2,000,000 |
| Tax-related penalty | £2,000,000 x 10% = £200,000 |
Example 3
This example shows a tax-related penalty in a straightforward case when return is delivered more than two years after the end of the accounting period
| DST return required | Accounting period ended 30 September 2020 |
|---|---|
| Filing date | 30 September 2021 |
| Return filed | 1 October 2022 (more than 24 months after the end of the accounting period) |
| Unpaid tax at 1 April 2022 (30.9.20 + 18 months + 1 day) = | £2,000,000 |
| Tax-related penalty | £2,000,000 x 20% = £400,000 |
The DST chargeable may not be final for the accounting period when HMRC charge the tax-related penalty. If HMRC revises the amount of DST on which the penalty is based, HMRC will also revise or make a further tax-related penalty determination. This will occur, for example, when:
- HMRC have based the penalty on the tax charged in a Revenue determination under FA20/SCH8/PARA16 and the Responsible Member subsequently delivers a return
- a return is amended or HMRC issue a further assessment.
This can have the effect of either increasing the penalty (if the unpaid tax is determined to be higher) or decreasing the penalty (if the unpaid tax is determined to be lower).
Interaction of flat rate penalty and tax related penalties
Tax-related penalties due under FA20/SCH8/PART9/PARA53 do not affect flat-rate penalties due under FA20/SCH8/PART9/PARA52. HMRC can charge a penalty under both paragraphs in relation to the same accounting period and DST return.
A Responsible Member usually incurs a flat-rate penalty before a tax-related penalty. However, it is possible to incur a penalty under both paragraphs at the same time.
If a Responsible Member incurs more than one tax-related penalty for the same accounting period, then HMRC will only impose the greater or greatest on each slice of relevant tax.