UTT17300 - Penalties: in what circumstances is a penalty chargeable

The guidance below sets out the circumstances in which a penalty may become chargeable, together with examples.

Not notifying within the time limit

Where a notification is due, a qualifying company or partnership is required to submit it by a specified time (see UTT15200). The business is liable to a penalty when a notification is submitted late. However, HMRC has some discretion whether to charge that penalty.

Example 1

A qualifying company has a company tax return filing date of 31 December 2022. It has uncertain tax positions in respect of corporation tax which need to be notified. It has until 31 December 2022 to submit its Uncertain Tax Treatment (UTT) notification in respect of corporation tax but does not submit its UTT notification until 15 January 2023. The failure occurs on 1 January 2023, but HMRC is not aware of it until 15 January 2023.

Example 2

A qualifying company has a financial year ending 31 December 2022. It has uncertain tax positions in respect of VAT which need to be notified. The company makes payments on account so is required to submit its final VAT return for the financial year ending 31 December 2022 by 31 January 2023 but does not submit its UTT notification until 28 February 2023. The failure occurs on 1 February 2023, but HMRC is not aware of it until 28 February 2023.

Not submitting a notification when one is required

Where a business has uncertain tax positions which create a requirement to notify, but it does not do so, the business is liable to a penalty. However, HMRC has some discretion whether to charge that penalty.

Example 1

A qualifying company has a company tax return filing date of 31 December 2022. It has until 31 December 2022 to submit its UTT notification in respect of corporation tax but does not submit a UTT notification. HMRC opens an enquiry into the company tax return and on 30 September 2023 identifies an issue which should have been notified. The failure occurs on 1 January 2023, but HMRC is not aware of it until 20 September 2023.

Example 2

A qualifying company has a financial year ending 31 December 2022 with a VAT return period ending on 31 December 2022 (Q4). It has until 31 January 2023 to submit a notification for the financial year ending 31 December 2022 but does not submit a UTT notification. The failure occurs on 1 February 2023, but HMRC is not aware of it until 28 February 2023.

Submitting an incomplete or inaccurate notification

Where a business has uncertain tax positions which create a requirement to notify, it must provide complete and accurate information in the form specified by HMRC. Where it doesn’t provide complete and accurate information, a penalty is chargeable. This is because the business had not provided a valid notification that contained all the required information. However, HMRC has some discretion whether to charge that penalty.

Example

A qualifying company submits a UTT notification in respect of PAYE on time, providing details of one uncertain amount. HMRC undertakes a compliance check into the PAYE return and identifies that an additional uncertain amount should also have been included in the single notification. The notification that was made is incomplete and a penalty is chargeable.