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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: penalties: two or more duty geared penalties - pre April 2009

S97A TMA1970 provides that where two or more duty geared penalties are incurred and fall to be determined on the same amount of tax and/or NIC that the aggregate amount of the penalty does not exceed the

  • greater, or
  • greatest of the penalties

It is important that you consider the overall penalty position of an employer when calculating penalties to be sought as part of the case. This will involve liaison with End of Year section who may have issued penalties for failure to submit a return.

Where a return has been submitted over 12 months late and is also incorrect there is potential for three penalties:

  • failure to submit a return - first 12 months of lateness
  • failure to submit a return - over 12 months of lateness
  • incorrect return.

You must consider the overall penalty position of the employer, for example:

An employer’s 2007-2008 P35 is received on 1st September 2009. There are two employees listed and the total Tax and NIC on the return is £6,800. The employer made payments totalling £800 during the year in question up to 19th April 2008.

The compliance check carried out reveals a further £4,000 due.

The penalty without reference to S97A TMA 1970 would be:

First 12 months of lateness (COG914045) - 12 x £100 = £1,200
   
Over 12 months of lateness (COG914050) - £10,000 x 15% (For the purposes of the example it has been assumed that penalty abatements totalled 85% leaving a penalty at 15%). = £1,500
     
  Incorrect return (COG914070) - £4,000 x 20% (For the purposes of the example it has been assumed that penalty abatements totalled 80% leaving a penalty at 20%) = £800
  Overall penalty = £3,500

The £4000 difference in the amount returned and that which should have been returned has been used to determine both the penalty for over 12 months of lateness and the incorrect return. S 97A TMA 1970 should therefore be applied and the penalty calculated as follows

First 12 months of lateness (COG914045) - 12 x £100 =£1,200
   
The £4,000 would attract the greater of the penalties  
Which is for an incorrect return at 20% = £ 800
  The penalty for the over 12 months of lateness would
therefore be £10,000 - £4,000 x 15% = £ 900  
  Overall penalty = £2,900

For post April 2009 see CH80000

In cases of difficulty contact TAA Liverpool.