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HMRC internal manual

Compliance Handbook

Penalties for inaccuracies: calculating the penalty: delayed tax - impact on potential lost revenue calculation: examples - gap between period end dates

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

When the delayed tax provisions apply, you calculate the potential lost revenue (PLR) by reference to the delay, see CH82392. This is the gap between the period end date for the return containing the inaccuracy and that for the return where the inaccuracy was, or would have been, reversed.

In most cases the reversal will be in the next return - see example 1 below. Occasionally the reversal may be in a later return - see example 2 below.

You should not apply the delayed tax rules in cases where you discover other unrelated errors in the same periods covered by the delayed tax. In such cases you should follow the normal multiple error rules in CH82250 and the example at CH82273.

This is because the rules for multiple errors must be applied  to all under and over statements in a period. Also in some cases if the delayed tax rules were applied there would be a higher penalty.

Example 1 - reversal in the next return

In a quarterly return the 06/2015 return contains an inaccuracy. This is reversed in the 09/2015 return. The PLR is the delayed tax x 5% x 3/12.

Example 2 - reversal in a later return

In a monthly return the 05/2015 return contains an inaccuracy. This is reversed in the 07/2015 return. The PLR is the delayed tax x 5% x 2/12.

Example 3 - reversal in later returns

In a monthly return the 05/2015 return contains an inaccuracy of £100,000. 50% of this is reversed in the 07/2015 return with the balance in the 09/2015 return. The PLR is 50% of the delayed tax inaccuracy x 5% x 2/12 (£416.66) plus 50% of the delayed tax inaccuracy x 5% x 4/12 (£833.33. Total PLR (rounded) = £1,249.

Further examples

 All tax declared late, see CH82395.

 Later return not yet due, see CH82397.