beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Compliance Handbook

Penalties for failure to file on time: overview

A person must file their return or any other document, see CH61180, on time. A person will be liable to a penalty when they do not file their returns or other documents on time.

The penalties for failing to file on time currently only apply to filing obligations under

  • Income Tax and Capital Gains Tax (CGT),
  • Bank Payroll Tax (BPT),
  • the Registered Pensions Scheme (RPS),
  • PAYE reported under Real Time Information - from 6 October 2014 for employers with 50 or more employees and 6 March 2015 for employers who have fewer than 50 employees,
  • the Construction Industry Scheme (CIS), and
  • Machine Games Duty (MGD),
  • Annual Tax on Enveloped Dwellings (ATED), and
  • Stamp Duty Reserve Tax (SDRT).

The penalties will be extended to other taxes in later years.

A person is liable to a penalty if they fail to file on time, unless they

  • have a reasonable excuse for not doing so, and
  • file the return or other document without unreasonable delay after the excuse ends.

Currently there are four penalty models:

  1. Penalty model for occasional returns and returns for periods of 6 months or more - applies to income tax, capital gains tax, bank payroll tax, registered pension scheme returns, annual tax on enveloped dwellings and stamp duty reserve tax.
  2. Penalty model for returns for periods between 2 and 6 months - applies to MGD.
  3. Penalty model for CIS returns
  4. Penalty model for PAYE Real Time Information Returns.

All four penalty models involve a combination of fixed and tax-geared penalties depending on how long the failure continues. Occasionally returns or documents and returns or documents for periods of 6 months or more also have daily penalties.

Where a return or other document has been outstanding for 12 months or more, we examine whether the person deliberately withheld information by failing to file the return or document by the filing date, or at all, and whether the information withheld would enable or assist HMRC in assessing the person’s correct tax liability. A person can reduce certain penalties incurred after 12 months if they make a disclosure. Note: there are no 12 month behaviour penalties for PAYE Real Time Information returns.

Higher maximum penalty percentages may apply after 12 months where the outstanding return involves an offshore matter.

When a person has incurred a penalty, we issue a penalty assessment. The person can appeal and is entitled to a review. Where we are unable to resolve an appeal on internal review, or if the taxpayer chooses to bypass the review process, the tribunal will hear the appeal.

We can agree to a special reduction of the penalty where there are special circumstances.

The penalty provisions in Sections 100 to 103 of TMA 1970 do not apply to a penalty under Schedule 55 FA 2009.

There are also specific rules covering what happens if a person incurs a penalty for failing to file their return or other document on time and another penalty on the same tax.