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HMRC internal manual

Compliance Handbook

Penalties for Failure to Pay on Time: Penalties on tax deferred: Overview

If a person is unable to make payment on time they can ask us to agree that they may defer payment of that amount of tax. They must make their request to defer payment before the due date for payment. Deferring payment affects any penalty that might otherwise apply for a late payment of this tax.

If we agree to them deferring the payment, we will set a new date for when that amount is due for payment. The period between the date the payment was originally due and the date by which we have agreed to accept later payment is known as the deferral period.

Unless the person breaks the agreement, they do not become liable to the penalties that would normally be charged on the amount that is deferred. However they remain liable for any penalties incurred before or after the deferral period.

The agreement is broken if the person

  • doesn’t pay the deferred amount at the end of the deferral period
  • fails to make payments during the deferral period, where that is a condition of the deferral, or
  • doesn’t comply with any other condition of the deferral agreement.

If the agreement is broken, we must issue the person with a notice advising them that their failure to comply with the agreement means that they are liable for any penalties calculated in accordance with the legislation, ignoring the deferral agreement. They are liable to that penalty or penalties from the date of the notice.

A person is also not liable to penalties where we and the person agree to vary the conditions of the deferral.