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HMRC internal manual

COTAX Manual

From
HM Revenue & Customs
Updated
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Background: typical case examples: company neither pays nor delivers

An established company fails to meet its payment and filing obligations.

COTAX automatically issues the first and second flat-rate penalty determinations. The caseworker makes a revenue determination in respect of estimated tax outstanding, together with the first tax-related penalty determination. The company incurs late payment interest which continues to run as no payment is made. COTAX automatically issues the second tax-related penalty determination.

The events are numbered in date order, and identified as follows.

  • Business event - action taken or arising outside HMRC.
  • Automatic event - automatic COTAX action.
  • Procedural action - action taken by an operator.
Order and type of event Action or actions taken
1 Business event Company AP ends (normal 12 month period).

Approximately 1 month after the recorded AP ends

2 Automatic event COTAX issues a notice to deliver, calculates the filing date (Word 42KB), records the specified period and the issue of the notice to deliver and creates the next AP on the COTAX record.
   

Some time later………………

3 Automatic event First payment reminder (PR1) issued, 12 days before the normal due date (Word 49KB) as no payment or NIL payslip returned to Accounts Office.
   
4 Business event Payment due date passes with Nil paid.
5 Automatic event Late payment interest starts to run on unpaid tax from the normal due date.
6 Automatic event CT208 combined return and payment reminder issued 28 days before the filing date as no payment or NIL payslip has been received and the return has not been logged.
7 Business event Filing date passes without receipt of a return.
8 Automatic event COTAX records first flat-rate penalty (F1) stage reached and company incurs flat-rate penalty of £100 or £500 as appropriate.
9 Automatic event 14 days later COTAX records first flat-rate penalty (F1) stage charged and issues the first flat-rate penalty.
10 Automatic event 30 days later COTAX issues a payment application for the penalty.

Some time later………………

11 Business event Filing date + 3 months + 1 day passes without receipt of a return.
   
12 Automatic event COTAX records second flat-rate penalty (F2) stage reached and company incurs flat-rate penalty of £200 or £1000 as appropriate.
13 Automatic event 14 days later COTAX records second flat-rate penalty (F2) stage charged and issues the second flat-rate penalty.
14 Automatic event 30 days later COTAX issues a payment application for the penalty.

Some time later………………

15 Business event AP end date + 18 months + 1 day passes without receipt of a return.
   
16 Automatic event Company incurs a 10 per cent tax-related penalty. COTAX records 10 per cent tax-related penalty stage reached and places company on work list DRNR (Determination Required No Return List).
17 Procedural action Caseworker makes revenue determination using function RAMA (Record / Amend Assessment) and tax-related penalty determination using function PPEN (Prepare Penalty Determination). Note: If the caseworker chooses not to use PPEN, COTAX will automatically issue the penalty 14 days later.
18 Automatic event COTAX issues notices of revenue determination and a 10 per cent tax-related penalty determination.
19 Automatic event 30 days after the issue of the revenue determination and the penalty, COTAX issues first payment application.
20 Automatic event 14 days later COTAX issues further payment application.
21 Automatic event 14 days later COTAX issues the final payment application.
22 Automatic event 14 days later, as no payment received, Accounts Office refers the case to the local Debt Management office, and the LA (Word 28KB) (Local Action) signal is set.

Some time later………………

23 Business event AP end date + 24 months + 1 day passes without receipt of a return.
   
24 Automatic event Company incurs the second 10 per cent tax-related penalty and COTAX records second tax-related penalty stage reached (TR2) and issues a further tax-related penalty determination, bringing the penalty up to 20 per cent (for TR2) as TR1 has become final in the absence of an appeal.
25 Automatic event Late payment interest continues to accrue on any unpaid tax from the normal due date.

See:

  • COM33011 for a list of forms relevant to this subject
  • COM33012 for a list of functions to use in particular situations
  • COM33013 for legislation applying to this subject.