CTM94240 - CTSA: penalties for late returns: More than one tax-related penalty for the same accounting period

FA98/SCH18/PARA90 (TMA70/S97A)

Companies may be liable to two or more tax-related penalties in relation to the same amount of CT.

For example, a penalty can arise under both FA98/SCH18/PARA18 and FA98/SCH18/PARA20.

When a company incurs more than one tax-related penalty for the same accounting period,then only one such penalty, whichever is the greater or greatest, is imposed on each slice of relevant tax.

Example

Company tax return	-
Filing date	30 September 2000
Accounts and return filed	1 May 2001
Tax payable	£25,000
Paid by 31 March 2001 (18 months after the filing date)	£5000
Unpaid tax at 18 month point	£20,000
Paragraph 18 tax-related penalty based on unpaid tax at 31 March 2001	£20000 x 10% = £2000
Enquiries establish negligent submission of incorrect accounts. Revised tax payable	£30,000
Paragraph 20 maximum penalty	£30000 - £25000 = £5000

Using an agreed penalty abatement for the Paragraph 20 penalty, the penalty calculation is:

Penalty	-
Paragraph 18 penalty £20,000 x 10% =	£2,000
Paragraph 20 penalty £ 5,000 x 30% =	£1,500
Total	£3,500

If there had been no Paragraph 20 culpability attaching to the additional £5000.00 the total Paragraph 18 penalty would have been 25000 X 10% = £2,500