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HMRC internal manual

Compliance Handbook

Charging penalties: interaction between penalties: details and examples: an inaccuracy penalty and a late payment surcharge are payable

Note: TMA70/S59C surcharges have not been charged in years after 2009-10. Late payment penalties under FA09/Sch56 replaced them for balancing payments due on or after 31 January 2012. Late payment penalties must not be withdrawn in the way that late payment surcharges have to be cancelled as they apply independently from all other penalties.

Although not strictly a penalty interaction, we cannot charge a surcharge when a penalty is also payable.

If the compliance check is to be concluded by contract settlement you will include the larger amount of penalty and if appropriate discharge any later surcharges that are subsequently charged.

If you are assessing the inaccuracy penalty, you should do this at the same time as you issue the closure notice, see EM5207a.

You should assess the FA07/Sch24 penalty without reduction because at the time you issue the penalty assessment no surcharge has been imposed. The due date for payment of tax shown on a closure notice is 30 days after that notice. Surcharges are incurred and automatically charged 28 days after the due date, and again 6 months after the due date, on the outstanding tax.

A check should be made 58 days after the date on the closure notice to find out whether or not surcharges have been incurred.

If the FA07/Sch24 penalty has become final, for example the appeal period has ended or an appeal has been concluded, then you must discharge the surcharge.

You will need to check again and do the same if a surcharge is incurred after 6 months.

If there is an appeal against the assessment which is still open at the time a surcharge is imposed, the surcharge should not be discharged. The person may of course also appeal against the surcharge and

  • if the FA07/Sch24 penalty appeal results in anything but the withdrawal or cancellation of the assessment, any existing or future surcharge on the same tax will again need to be discharged
  • if, however, the FA07, Sch24 penalty is discharged then, subject to appeal, the surcharge remains payable.

Exceptionally, if an inaccuracy penalty is 10% or less, for example due to a special reduction, it should not be charged if a surcharge has already been charged. If a larger penalty has been charged and is subsequently reduced to 10% or less, it should be withdrawn in favour of the surcharge that is charged.

If the enquiry is to be concluded by contract settlement you will include either the penalty or any surcharge, whichever is largest.


Helen sends in her SA return on time. It shows a liability of £50,000 which she pays on time. You establish during a compliance check that the liability is understated by £25,000. You establish that an inaccuracy penalty of 25% is due and that the additional tax, if paid late, will attract a surcharge under TMA70/S59C.

Inaccuracy penalty £25,000 x 25% = £6,250

The closure notice and penalty assessment are issued on 29 March 2012. The due date for payment is 28 April 2012.

You check the SA system on 26 May 2012, 58 days after the date on the closure notice and after the penalty assessment appeal period has expired. The outstanding tax has not been paid and surcharges have been charged as follows:

£25,000 x 10% = £2,500

The surcharges must be discharged.

You check the SA system again on 28 October 2012, 6 months after the date on the closure notice, and note the outstanding tax has been paid. No further surcharges will be charged.