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HMRC internal manual

Compliance Handbook

Penalties for Failure to File on Time: Calculating the penalty: Calculation process: Calculating the 12 month further penalty - example

Dominic failed to file his income tax return. After the return had been outstanding for 12 months and after discussions with Dominic, we considered the facts and concluded that information that would have been in the return had been deliberately withheld and was also concealed.

Dominic’s total tax liability for the return is £40,000, so the 12 month further penalty is the maximum of 100% of the total tax liability of the return.

  100% x £40,000 = £40,000 penalty.

If Dominic had already incurred a 5% 6 month further penalty, then this penalty of £40,000 above, will be reduced by £2,000, so that the total of the tax-geared penalties do not exceed 100% of the total tax liability of the return, see CH65040.