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HMRC internal manual

COTAX Manual

Penalties: penalty determinations: superseded accounting periods

This subject is presented as follows

General
Return period that is not an AP
Superseded and superseding APs sharing a common specified period
Superseded and superseding APs not sharing a common specified period

General

It is important to note that COTAX handles penalties on superseded APs in a different way to tax, as the penalty relates to the specified period, not the AP.

The following examples are not intended to cover every set of circumstances which may arise.(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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Return period that is not an AP

COTAX only charges a penalty for a return period that is also an AP of the company.

When you supersede an AP where a penalty has already been charged, by a period during which the company is outside the charge to CT, you should discharge the penalty on appeal.

Example

Date Event
   
20/01/2011 A notice to deliver is issued specifying the period 01/01/2010 to 31/12/2010.
16/01/2012 COTAX charges and issues the first Flat-rate (F1) penalty automatically.
16/04/2012 COTAX charges and issues the second Flat-rate (F2) penalty automatically.
01/07/2012 18 months after AP ended 31/12/2010, COTAX puts it on work list DRNR (Determination Required No Return).
07/07/2012 Subsequently the caseworker raises a Revenue Determination using Function RAMA (Record / Amend Assessment).
21/07/2012 14 days later COTAX charges the first tax related (TR1) penalty automatically.
01/09/2012 The company tells us it was dormant throughout 2010.

The caseworker uses:

  • function RAMA to reduce the revenue determination to nil
  • function MAPD (Maintain AP Dates) to make the AP dormant.
The tax related penalty is automatically reduced to nil when the revenue determination is amended, and the F1 and F2 penalties are automatically reduced to nil when the AP is made dormant.

If you have received an appeal against the penalties, an entry on work list PENR (Penalties Requiring Review) shows the caseworker that they need to use function PPEN to reduce the flat rate penalties to nil. Although the company was strictly still liable to make a return for the specified period, the caseworker normally discharges the penalties on appeal when informed the company was dormant.

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Superseded and superseding APs sharing a common specified period

When an AP is superseded, COTAX may have recorded apparent liability to a late filing penalty for the superseded AP and penalties may already have been determined.

COTAX cannot automatically handle the penalty implications of superseded and superseding APs. If an AP is superseded and a penalty determination has been made on it, COTAX lists the case for manual review on:

  • EFRL, if the AP structure is superseded as a result of online filing
  • PENR, if the AP structure is changed manually with LRTN or MAPD.

Where penalty determinations have been issued, COTAX sets the inhibit penalty indicator (INH) on any superseding AP with an end date falling into the same specified period as a superseded AP with a charged penalty determination. This is to prevent an incorrect double charge to late filing penalties.

Example

E Ltd regularly made up its accounts to 31 March and receives a notice to deliver specifying the period 01/04/2010 to 31/03/2011.

Date Event
   
31/03/2012 Return not delivered.
01/04/2012 COTAX records the first flat rate (F1) penalty occurrence.
16/04/2012 COTAX issues the first flat rate (F1) penalty automatically.
30/04/2012 E Ltd files a return, accounts and computations online for the 11 month period ended 28/02/2011, having changed its AP to the last day of February.

COTAX sets the inhibit signal for the superseding AP to prevent any penalty determination being issued and lists the case on EFRL with a reason of ‘AP changed’.

Subject to any question of a reasonable excuse for the delay, the penalty incurred for the specified period is £100.

The already charged penalty for the superseded AP is regarded as available to cover any penalty due in respect of the superseding AP falling in the same specified period.

Notes:

  1. When a company fails to deliver its return by the filing date for three or more successive APs requiring returns, it is liable to increased flat-rate penalties of £500 and £1000. COTAX checks previous live APs to determine whether the increased rate applies. It does not recognise that the increased rate should apply where a previous penalty determination is present on a superseded AP. In these circumstances you should:​
  • unset the inhibit signal on the superseding AP
  • reduce the determination on the superseded AP to nil
  • raise a fresh determination on the superseding AP using PPEN.
  1. Where a penalty determination has not been issued on the superseded AP, COTAX does not allow access to the superseded AP but automatically deals with penalties arising on the superseding AP.

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Superseded and superseding APs not sharing a common specified period

Example

Date Event
   
16/03/2011 F Ltd incorporated.
01/05/2011 Form CT41G or OTRS notification received advising:
  • business commenced 16/03/2011
  • company will draw up accounts to 31/12/2011.    
      22/05/2011 Date of commencement and future accounting date entered on company’s COTAX record.
      20/01/2012 Notice to deliver served specifying the period 16/03/2011 to 31/12/2011.
      31/12/2012 Filing date for AP ended 31/12/2011.
      16/01/2013 COTAX issues first flat-rate penalty as no return received for AP ended 31/12/2011.
      21/01/2013 Notice to deliver served specifying the period 01/01/2012 to 31/12/2012.
      12/02/2013 Company appeals penalty determination for the period 16/03/2011 to 31/12/2011 on the grounds that it was not required to deliver any return for the period specified in the notice.
        Contrary to the CT41G or OTRS notification, the company draws up its first accounts for the period 16/03/2011 to 31/03/2012 - to “the last day of the month in which the anniversary of its incorporation falls” under the normal Companies Act rule. (See section 391(2)(b)(ii) CA 2006).
      05/04/2013 Company changes its APs online and delivers two returns for the periods 16/03/2011 to 15/03/2012 and 16/03/2012 to 31/03/2012 which are logged, captured and the self assessment recorded automatically.
      06/04/2013 The case appears on EFRL with a reason ‘AP changed’.
      22/04/2013 COTAX issues first flat-rate penalty for APs ended 15/03/2012 and 31/03/2012 as both were received after their common filing date of 31/03/2013. (See para 14(1)(b) Sch 18 FA 1998).

COTAX does not set the inhibit penalty indicator (INH) on either superseding AP as neither share a common specified period with the superseded AP which has a charged penalty determination. COTAX therefore penalises the company for its:

  • failure to file returns for APs 16/03/2011 to 15/03/2012 and 16/03/2012 to 31/03/2012 by the filing date, and
  • apparent failure to file a return for specified period 16/03/2011 to 31/12/2011.

As there was no AP ending in or at the end of the specified period 16/03/2011 to 31/12/2011, no return is due and you should use PPEN to reduce the penalty determination on the superseded AP to nil.

See:

  • COM101081 for a list of forms relevant to this subject
  • COM101031 for a list of functions to use in particular situations
  • COM101011 for legislation applying to this subject.