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HMRC internal manual

COTAX Manual

HM Revenue & Customs
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CT Pay and File: penalties for late delivery of returns: introduction

You can find guidance on the general principles regarding late filing penalties at COM100001 onwards. This section gives you specific guidance on CT Pay and File accounting periods where that guidance differs from CTSA.

A company that fails to deliver a return for a CT Pay and File accounting period by the filing date is normally liable to penalties under Section 94 TMA 1970. The amount of the penalty varies depending on the date that the company delivers the return.

Penalties can be fixed or tax geared.

These are colloquial terms as they had no statutory name in TMA 1970. For CT Self Assessment APs, they are defined in legislation as flat-rate and tax-related penalties.

COTAX does not produce separate penalty output for CTSA and CT Pay and File periods, so all penalty output refers to flat-rate and tax-related penalties as appropriate. The terms have either their statutory or plain English meaning depending on the legal context.

You should note that the extension regarding tax-related penalties referred to at COM100090 relates only to CTSA APs and not CT Pay and File APs.

Tax-geared penalties chargeable are:

  • ten per cent of the tax unpaid at that 18 month point, if the company delivers its return within two years of the end of the AP
  • a further ten per cent (20 per cent in total) of the tax unpaid at that 18 month point, if the company delivers its return later than two years after the end of the AP.

S94(7) TMA 1970 defines tax unpaid as:

  • the CT chargeable on the profits of the return period that remains unpaid 18 months after the end of the return period less
  • any Income Tax that is to be set-off under S7(2) or 11(3) ICTA 1988.

In this context, CT chargeable means the final figure, after deduction of group relief and carry-backs of trade losses, surplus ACT and so on, from later APs.

The sole exception to this rule is in S94(8) TMA 1970, that you do not deduct ACT carried back from a subsequent AP that ends more than two years after the end of the AP for which the penalty is due.

Example 1 (Word 40KB) illustrates the calculation of tax-related penalties and the application of the rules to determine the amount of tax unpaid for a CT Pay and File return period.