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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Charging penalties: interaction between penalties: details and examples: tax geared failure to file penalties exceed 100% of the liability to tax

If you establish a penalty for failure to file and deliberate withholding of information that is more than 95% of the liability to tax you will have to make an adjustment. This is because without an adjustment the 6 month and 12 month tax geared failure to file penalties would exceed 100%, which FA09/Sch55 does not allow.

Note: This adjustment is in addition to the adjustment to the penalty calculation to deduct the automatic 12 month penalty, see CH403321.

Guidance on making adjustments to penalties in the NPPS is at CH407720.

The 100% limit does not apply where failure to file involves a Category 2 or Category 3 offshore matter and the tax at stake is income tax or capital gains tax. See CH62260 for guidance on the three categories of information.


Daksha has filed all her returns except the return for 2010-11 which was due on 31 January 2012. You open a compliance check based on information that showed she made a one-off net capital gain in that year resulting in Capital Gains Tax of £10,000.

You establish that Daksha deliberately withheld information by failing to file the return and this withholding was concealed by creating false documents that were not documents in their own right under FA07/Sch24. She did not cooperate with the check or make a disclosure and is liable to a penalty of 100% of the liability.

The total liability for the period is £20,000 and a discovery assessment is made. Without adjustment Daksha will receive the following penalties.

Initial fixed penalty incurred on the penalty date £100
£10 daily penalty for 90 days after the return had been outstanding for 3 months £900
6 month automatic penalty of 5% of the £20,000 tax liability of the overdue return £1,000
12 month automatic penalty of 5% of the £20,000 tax liability of the overdue return £1,000
12 month further penalty for deliberate and concealed withholding of information of 100% of the tax liability of the overdue return less the amount charged automatically at 12 months - £20,000 less £1,000 = £19,000
Total 6 and 12 month tax geared penalties (before adjustment) £21,000

The total of the 6 month and 12 month penalties exceeds 100% of the liability from the return (£20,000). You will need to reduce the penalty by £1,000 in the NPPS.

The initial fixed penalty and the daily penalties totalling £1,000 remain chargeable because they are not calculated as a percentage of the tax liability on the return.