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HMRC internal manual

Compliance Handbook

Penalties for Failure to File on Time: How to process a penalty: When you can assess a penalty

Normally you should issue the penalty assessment to the person when they put right the failure that gave rise to the penalty, namely when they file the return or other document. But that is not essential. You can assess the penalty in the absence of the return, see CH63560.

A contract settlement following a compliance check is equivalent to raising a penalty assessment. EM6000 onwards gives guidance on contract settlements.

We can assess a penalty up to the later of

  • the end of a 2 year period beginning with the filing date, see CH61140, and
  • the end of a 12 month period that begins with

    • the end of the appeal period for the assessment of tax that would have been shown in the return, or
    • where there is no such assessment, the date on which that liability is ascertained or it is ascertained that the liability is nil.


Solomon filed his 2014-15 ITSA return on 20 July 2017. We issued an income tax/CGT assessment on 1 August 2017. The filing date is 31 January 2016. We can assess a penalty up to the later of

* 31 January 2018, being 2 years from the filing date, and
* 1 September 2018, being 12 months after the end of the 30 day appeal period for that return.

Therefore, we have until 1 September 2018 to issue a penalty assessment to Solomon.

The appeal period means either

  • the period in which the appeal can be brought, or
  • the period from the appeal being brought to when it is either determined or withdrawn.