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HMRC internal manual

Compliance Handbook

Penalties for inaccuracies: calculating the penalty: delayed tax - impact on potential lost revenue calculation: introduction

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

There are special rules for calculating the potential lost revenue (PLR) for a delayed tax inaccuracy. These apply instead of the normal rules for calculating the PLR (which are at CH82150+).

You need to know what a delayed tax inaccuracy is, see below, and how to calculate the PLR, see CH82394.

A delayed tax inaccuracy is one that

  • results in an amount of tax being declared later than it should have been
  • always has two elements in different tax periods (one understatement and one over statement) - and exceptionally in some cases even if a return for one period (that would contain the overstatement) is not yet due to be filed, and
  • specifically, meets the two conditions at CH82391.

The delayed tax provisions cover cases where the inaccuracy only has a timing effect so that, comparing an earlier period with a later one, there is no overall loss of tax (assuming the same rate of tax applies to both periods) - for example VAT tax point errors.

These provisions also cover situations where an overclaim in one period is matched by an underclaim in a late period.

You need to check whether the inaccuracy means that all, or only part, of the tax in the later return falls under the delayed tax rules. See the examples at CH82395.

Exceptionally, if the later return has not yet been submitted, you need to decide whether the reversal would have taken place without the person doing anything if the inaccuracy had not been discovered. See condition 1 at CH82391 and the examples at CH82397.

Although both elements of the delayed tax inaccuracy fall under the delayed tax provisions, the multiple inaccuracy rules, see CH82250, do apply to either the understatement or overstatement element if any periods covered by the delayed tax provisions contain other unrelated inaccuracies. See the example at CH82273.

This means that you should ignore the delayed tax rules in all cases where there are other unrelated inaccuracies in the same accounting periods. This applies regardless of whether those inaccuracies are deemed to be errors despite taking reasonable care.

The rules on delayed tax can apply when a taxpayer fails to take reasonable steps to notify HMRC about an inaccuracy, see CH81143.

Where penalties also arise on other inaccuracies, see the guidance CH82180 and CH82250.

Where appropriate, the delayed tax provisions can be applied for all schedule 24 inaccuracy penalty behaviour types. These behaviours are; careless, deliberate and deliberate and concealed.

The delayed tax provisions do not apply to

  • wrongly recorded losses, see CH82300
  • inheritance tax cases - because for IHT there will not be a later return in which any inaccuracy can be reversed.