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: Types of penalties for failure to file on time: Quantifying tax-geared penalties where no return filed

If a return or other document remains outstanding after 6 months and 12 months from when it was due, the person is liable to a penalty that is calculated as a percentage of the tax liability of the outstanding return. This is known as a tax-geared penalty.

  • Occasional returns and returns for periods of 6 months or more attract tax-geared penalties if they are outstanding

    • after 6 months, see CH62140, and
    • after 12 months - not involving an offshore matter, see CH62240, or
    • after 12 months - involving an offshore matter, see CH62260+.
  • CIS returns attract tax-geared penalties if they are outstanding

  • Returns for periods between 2 and 6 months attract tax-geared penalties if they are outstanding

If the return has still not been filed when you calculate the penalty, you will not yet know the tax liability of the return. However, the tax-geared penalty is calculated on the liability that would have been shown in the return. This is the net liability after taking into account tax deducted at source. It is not reduced by any amount that has been paid towards that liability.

You need to establish the liability of the tax return to the best of your information and belief.

Information that we could use to establish a realistic tax liability of the outstanding return includes

  • the tax liability for the person in the previous years,
  • VAT returns for the period, and
  • knowledge of the industry.

We will amend the penalty once the outstanding return is filed, or the failure is otherwise remedied, and the actual tax liability is known, see CH64250.

Although the return has not been filed and perhaps a determination or central assessment has been issued, the person has the right to appeal against the penalty assessment, see CH64500+.

We will increase or decrease the 6 month further penalty and 12 month further penalty if the tax liability of a return is subsequently increased or decreased. If the tax liability of the return is increased after it has been filed, perhaps as a result of an enquiry into that return, then not only will we increase the penalty for filing the return late, we will also consider inaccuracy penalties under Schedule 24 FA 2007, see CH65060.

When calculating a liability to tax, both before the return is filed and amending the penalty once it has been filed, no account is taken of any relief under Section 458 of CTA10 (relief in case of repayment or release of loan) that is deferred under subsections (3) and (4) of that section.