Penalties - failure to pay tax - Section 107 of and Schedule 56 to Finance Act 2009
What it applies to
This penalty applies where a person fails to pay an amount of tax on or before the due date for payment.
Penalty regime
- Penalties of 5 per cent of the amount of tax unpaid, generally one month after the payment due date
- Further penalties of 5 per cent of any amounts of tax still unpaid at 6 and 12 months
- Suspension of late payment penalties where the taxpayer agrees a time to pay arrangement (where a tax debt is paid over time) with HMRC.
Special reduction
The special circumstances regime applies to these penalties as it applies to penalties for inaccuracies caused by careless or deliberate errors.
Assessment and appeals
Penalties under this Schedule must be assessed by HMRC, and a taxpayer has a right of appeal to the FTT. There are time limits within which the assessment must be made. It is the later of two dates. The first date is the last day of a two year period beginning with the payment date. The second date is the last day of a period of twelve months beginning with the end of the appeal period for the assessment of the amount of tax in respect of which the penalty is assessed (or where there is no such assessment, the date on which the amount of tax is ascertained).
Reasonable excuse
The taxpayer can mitigate the penalty by establishing a reasonable excuse to HMRC or to the FTT. The characteristic carve outs from what is a reasonable excuse (eg. insufficiency of funds, reliance on another etc) are included here.