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HMRC internal manual

Compliance Handbook

Penalties for failure to notify: in what circumstances is a penalty payable: annual obligation to notify

Some taxes, for example income tax, have an annual obligation to notify. You therefore need to consider each tax period separately to determine which rules to use to calculate the penalty. Where the failure occurs, see CH71240, before 1 April 2010 the previous rules will apply. Where the failure occurs on or after 1 April 2010 the new rules apply.


A person who is chargeable to income tax for a tax year but does not receive a tax return, must notify us that that they are chargeable for that year within 6 months of the end of the year. But the obligation to notify does not apply where all of the person’s income is subject to PAYE or where sufficient tax has been deducted at source to meet the net liability for the year.

In June 2008 Akash started in business providing gardening services. He does not have any other source of income. He does not notify us that he is chargeable to income tax and is not sent a tax return. In August 2011 we find that he is in business and issue tax returns for 2008-09, 2009-10 and 2010-11.

Akash’s assessable profits are

2008-09 £10,000
2009-10 £20,000
2010-11 £30,000

As Akash had not received a tax return, he should have told us that he was chargeable to income tax for 2008-09 by 5 October 2009. He has incurred a penalty for 2008-09 which is determined under the previous rules.

Akash didn’t receive a tax return for 2009-10 either, so he should have notified us that he was chargeable to income tax for 2009-10 by 5 October 2010. He has incurred a penalty for 2009-10 which is determined under the new rules.

A failure also occurs where we have agreed to withdraw a notice to file a self assessment tax return, and the person subsequently finds that they do have an obligation to notify chargeability to tax under section 7 of TMA 1970, and they fail to notify us of that chargeability.