SAM61110 - Interest, penalties and surcharge: penalties: tax-geared penalties

This guidance refers to tax returns received for 2009-10 and earlier. For further information regarding the new rules for the tax years 2010-11 and later, see SAM61200 onwards.

This penalty applies to individuals and trustees who fail to file their return on time. It does not apply to a partnership return.

The penalty can be charged on a determination or discovery assessment, not just on the return, so can be charged before the return is received.

The Work Management system alerts the office responsible for Technical work of cases for consideration of tax - geared penalties.

That office may impose these penalties where the return is more than 12 months late, normally by inclusion in a contract settlement.

If you need to issue a penalty determination, you must first seek the approval of your Authorising Officer, see EM5201. You can never authorise your own penalty determination.

  • You must submit the case to the Authorising Officer with a completed AO Report Form, following the guidance at EM5205 to EM5206.
  • The Authorising Officer determines the amount of the penalty. This means that they approve the amount of the penalty and pass the case back to you.
  • You are then responsible for issuing the penalty determination. The taxpayer’s rights are protected by means of appeal provisions.

The Authorising Officer for the penalties listed below is normally your manager. Where there is a group with a Customer Compliance Manager (CCM), the CCM can be the Authorising Officer for that group, regardless of the grade of their tax specialists.

  • TMA70/S7/S10/S11A, FA98/Sch18/Para 2, FA08/Sch41/Para1: Failure to notify chargeability
  • TMA70/S12B(5), FA98/Sch18/Para 23: Failure to keep and maintain records in relation to returns
  • TMA70/Sch1A/Para 2A(4): Failure to keep and maintain records in relation to claims
  • TMA70/S93(5), TMA70/S93(2)(old), TMA70/S94: Tax-geared late filing penalties
  • TMA70/S95 or TMA70/S96, FA98/Sch18/Para 20 or 89, FA07/Sch24/Para1: Incorrect returns, etc
  • TMA70/S95A, FA07/Sch24/Para1: Incorrect partnership returns, etc
  • TMA70/S98(2): Incorrect information, return, etc
  • TMA70/S98A(2)(b) and TMA70/S98A(4), FA07/Sch24/Para1: Late or incorrect employer end of year returns.

The penalty is based on the amount of the tax unpaid as at the original filing date and will only be imposed once the return has been received.

The amount of the penalty is based on 100 per cent of the amount of the tax unpaid at the filing date - but is subject to abatement.

Where a penalty is tax geared the time limit for penalty proceedings or determination is within

  1. six years after the offence was committed, or
  2. if later, three years after the tax on which it is based was finally determined.

For non tax geared penalties the time limit is within six years after the date on which the offence was committed.

Section 16(1)(b) Social Security Contributions & Benefits Act 1992 applies all the time limits to Class 4 NIC.

Under Section 118(4), the amount of tax covered by any assessment or self assessment is not finally determined until the assessment or self assessment can no longer be varied, whether by the tribunal on appeal or by the order of any Court (see the Court of Appeal judgement in Salmon v Havering Commissioners & CIR 45TC77). It follows that a demand for a stated case under TMA70/S56 will keep open the time limits until the final order of the Courts or the prior settlement of the appeal, see EM5001.

More information on tax - geared penalties is available in the Enquiry Manual, including details of the penalties for incorrect returns submitted fraudulently or negligently, see EM4580.