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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Penalties: Failure to Make a Return for SA Years: Fixed Penalty Reduction or “Capping”



Penalties under Schedule 55 FA09 for failure to file on time, see CH60000+, apply to income tax and capital gains tax returns for the year ended 5 April 2011 and later years. The returns for the year ended 5 April 2011 are those due to be filed on or before 31 October 2011, or 31 January 2012 if filed electronically.

This page is concerned principally with individual SA returns for the year ended 5 April 2010 and earlier, and S93. For partnership returns generally and S93A, see also EM4585 - though you should be aware that there is no “capping” of S93A(2) and (4) penalties.

If the taxpayer is able to show that the amount of tax/NICs which would have been payable for that year, if a proper return had been delivered on the filing date, is less than the fixed penalties imposed under sub-sections (2) and (4), then those penalties are reduced (“capped” in departmental jargon) to that amount.

For this purpose the amount of tax which would have been payable if a return had been delivered on the filing date is defined as the amount which would have been payable under TMA70/S59B. Any payments on account made under TMA70/S59A or otherwise before the filing date are to be taken into account, as is any PAYE or other tax deducted at source in respect of that year.

Example 1

A 2006-2007 return when eventually received shows total liability £50,000.

Two Section 59A payments of £23,000 were made on 31 January 2007 and 31 July 2007.

An additional payment on account was made on 15 January 2008 of £2,000.

Tax deducted under PAYE for 2006-2007 was £1,925.

The total paid was therefore £49,925 leaving a balance payable of £75 on 31 January 2008.

Any penalties imposed under Section 93(2) or (4) for 2006-2007 would be reduced to £75.

Example 2

The facts are the same except the additional payment of £2,000 had been made on 15 February 2008 rather than 15 January 2008.

No relief would be due under Section 93(7). The tax/NICs unpaid at 31 January 2008 is now £2,075, ie more than the penalties.