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HMRC internal manual

Compliance Handbook

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HM Revenue & Customs
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Penalties for Failure to Pay on Time: Rules for specific taxes: Machine Games Duty (MGD): Penalties: Example

Example of default and further penalties on MGD for

First failure to pay on time

Second failure to pay on time

Subsequent failures to pay on time

First failure to pay on time

Buchanan Limited delivers their MGD return for the 3 months ended 31 May 2013 on 28 June 2013. The return shows that Buchanan Limited has MGD liability of £120,000. This MGD is due on 30 June, being 30 days after the end of the accounting period. However, because the 30 June 2013 is a Sunday, the payment is due on the last business day before that day. This is Friday 28 June. Buchanan fails to make any payment by the due date.

The first failure to pay MGD by the due date counts as a failure and starts the penalty period, but does not attract a default penalty. A penalty period starts on the penalty date of 29 June 2013 (being the day after the due date) and ends 12 months after the due date, being 28 June 2014. A penalty period is extended if there are further failures within a penalty period to pay MGD by the due date.

If Buchanan Limited has not paid MGD 6 months after the penalty date, they will be liable to a further penalty of 5% of the unpaid duty at that time. They will also be liable to further penalty of 5% of any duty outstanding after 12 months from the penalty date (in addition to the penalty incurred after 6 months).

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Second failure to pay on time

Buchanan Limited delivers their MGD return for the 3 months ended 31 August 2013 on 30 September 2013. The return shows that Buchanan Limited has a MGD liability of £220,000. This MGD is due on 30 September, being 30 days after the end of the accounting period. Buchanan Limited fails to make any payment. Buchanan Limited makes some payments at later dates, as shown in the table below.

The due date is 30 September 2013. The penalty date is the day after the due date and SO IS 1 October 2013.

This is the second failure in the penalty period and counts as the first default. Using the table in CH155340 makes Buchanan Limited liable to a default penalty of 2% of the unpaid MGD. This failure also extends the penalty period to 12 months from 30 September 2013.

The penalties are as follows:

  Payment Unpaid Duty Penalty
       
Amount due on 30 September 2013   £220,000  
Default penalty of 2% on £220,000 at 1 October 2013     £4,400
Payment on 20 October 2103 £150,000 £70,000  
6 month further penalty of 5% on £70,000 at 1 April 2014     £3,500
Payment 1 May 2014 £50,000 £20,000  
12 month further penalty of 5% on £20,000 at 1 October 2014     £1,000
Payment 20 November 2014 £20,000 £0  
Total Penalty     £8,900

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Subsequent failures to pay on time

Buchanan Limited delivers their MGD return for the 3 months ended 30 November 2013 0N 20 December 2013. The return shows that Buchanan Limited has a MGD liability of £150,000. This MGD was due on 30 December, being 30 days after the end of the accounting period. Buchanan Limited fails to make any payment. Buchanan Limited makes some payments at a later date, as shown in the table below.

The due date is 30 December 2013. The penalty date is the day after the due date and so is 31 December 2013. The rate of the default penalty is 3% because this is the third failure, but the second default, in the penalty period. This failure also extends the penalty period to 12 months for 30 December 2013.

The penalties are as follows:

  Payment Unpaid Duty Penalty
       
Amount due on 30 December 2013   £150,000  
Default penalty of 3% on £150,000 at 31 December 2013     £4,500
6 month further penalty of 5% on £150,000 at 30 June 2014     £7,500
Payment 1 August 2014 £100,000 £50,000  
12 month further penalty of 5% on £50,000 at 31 December 2014     £2,500
Payment 20 January 2015 £50,000 £0  
Total penalty     £14,500