Penalties for failure to make returns etc - Section 106 of and Schedule 55 to the Finance Act 2009
What it applies to
This penalty applies where a person fails to make or deliver any returns in respect of the following taxes, namely:
- income tax (including PAYE)
- Capital Gains Tax
- corporation tax
- NICS's
- CIS
- stamp taxes
- IHT
- pension schemes
- PRT.
They will be phased in over a number of years (in year PAYE from April 2010).
Penalty regime
- £100 penalty immediately after the due date for filing (whether or not the tax has been paid)
- Daily penalties of £10 per day (annual obligations only) for returns that are more than three months late, running for a maximum of 90 days
- Penalties of 5 per cent of tax due for the return period for prolonged failures (over 6 months and again at 12 months)
- Higher penalties of 70 per cent of the tax due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (100 per cent penalty if deliberate with concealment).
Disclosure
The tax geared penalties for the deliberate withholding of information (whether concealed or not concealed) can be reduced by prompted or unprompted disclosure. The reduction depends on the quality of disclosure. A 100% penalty can be reduced to 30% by unprompted disclosure and 50% by prompted disclosure. A 70% penalty can be reduced to 20% by unprompted disclosure and 35% by prompted disclosure.
Special reduction
The special circumstances regime applies to these penalties as it applies to penalties for inaccuracies caused by careless or deliberate errors.
Interaction with other penalties
If a taxpayer is liable to more than one penalty which is determined by reference to the same tax liability, he won't suffer twice. A penalty under this regime is reduced by the amount of any other penalty incurred by that person which is determined by reference to the same tax liability.
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 filing 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 shown on the return (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.