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HMRC internal manual

Compliance Handbook

Charging penalties: interaction between penalties: details and examples: a failure to notify penalty and a late payment surcharge are payable

Where a person is liable to a penalty for a failure to notify (FTN) and a late payment surcharge, the late payment surcharge must be discharged and the penalty for the FTN charged in full.


Paul started in business on 4 July 2009 but does not notify HMRC until 26 January 2012. You send Paul a return for 2009-10 which he completes and returns to you on 16 February 2012. The return shows tax liability of £13,520 which he pays.

Paul is liable to a penalty for failure to notify and you establish that a 25% penalty is appropriate.

He will automatically have been charged a 10% late payment surcharge. As you cannot charge a surcharge and a FTN penalty on the same tax you must discharge the surcharge, see SAM62050 and charge the FTN penalty because it is higher.

You must make sure the FTN penalty has become final, for example the appeal period has ended or an appeal has been concluded, before you discharge the surcharge.

FTN penalty 25% x £13,520 = £3,380
Surcharge 10% x £13,520 = £1,352
Surcharge discharged 10% x £13,520 = - £1,352
FTN penalty payable 25% x £13,520 £3,380