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HMRC internal manual

Compliance Handbook

Penalties for failure to notify: calculating the penalty: potential lost revenue: income tax and capital gains tax

The potential lost revenue (PLR) from a failure to notify chargeability for income tax (IT) or capital gains tax (CGT) is the amount of tax that is unpaid on 31 January next following the tax year.

Example

Neil starts in self-employment on 4 July 2010. He does not tell us about his business until 20 November 2011.

On 15 January 2012 Neil makes a payment of £3,000 on account of his tax liability for 2010-11. On 21 February 2012 Neil submits a 2010-11 tax return showing a tax liability of £12,894.

Neil should have told us he was liable to income tax for 2010-11 by 5 October 2011. The PLR for Neil’s failure is the tax unpaid at 31 January 2012. PLR is £9,894 (£12,894 - £3,000).

Where the failure to notify chargeability for IT or CGT has arisen after a notice requiring the person to file a self assessment tax return has been withdrawn, then the PLR is the amount of tax that is unpaid at the later of

  • 30 days from the day after the date that the notice to file was withdrawn,
  • 31 January following the tax year, and
  • if we have refunded a payment on account in respect that year, then the day after the refund was issued.

Example

Anton was issued with a notice to file a self assessment tax return for the 2013-14 tax year. At Anton’s request we withdrew the notice to file a self assessment return. The notice was withdrawn on 10 January 2015. No payments on account had been made for this year.

On 1 March 2015 Anton advised us that he overlooked a capital gain that arose in the 2013-14 year. He filed his return and made payment of £20,000 on that same day.

The PLR is the amount of tax unpaid at the later of

* 9 February 2015 (30 days from 11 January 2015), and
* 31 January 2015.

If Anton had made payment by 9 February then there would be no PLR on which to consider penalties.

FA08/SCH41/PARA7 (2)