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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: Daily Penalties


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 and S93A see also EM4585 - though you should be aware that there is no “HMRC determination” TMA70/S28C for partnerships. Partnerships do not pay tax.

Often the most appropriate way of encouraging the submission of a late return is to make an HMRC determination EM2027, but you should also consider seeking a direction for daily penalties where

  • two or more SA returns are outstanding and determinations have been made, or
  • three returns are outstanding, or
  • in partnership cases, the returns of all the individual partners have been filed and any amounts due (including penalties) from the individual partners have been paid or are the subject of enforcement action, or
  • in PAYE cases, two or more returns are outstanding and there is no basis for raising a determination.

You may seek daily penalties in other cases where large amounts of tax may be at risk (for example, persistent failure to submit a particular return) or there are particular pressing reasons for requiring early submission of the Return.

Application can be made to the tribunal for a direction under Section 93(3) in respect of individuals or trustees. Such action should only be undertaken with the approval of the authorised officer who should also set the daily rate (see EM4572) when approving action leading to the first tranche of daily penalties. The authorised officer for this purpose will usually be an SO manager within DMB, under the dedicated Board’s Order at EM5322. Alternatively an authorised officer at Grade 6 level can act under the main Board’s Order at EM5321.

Be aware that no S93(1) penalty determination can be made at any time after the failure has been remedied, TMA70/S93(6).

Some of these cases will be selected by officers in the normal course of working on the basis of information received. Other cases will arise from SA work lists and DMB action. The SA history notes for the taxpayer will be available but it may be prudent to ask the Debt Management office to check their IDMS history notes for any relevant information. You will need to examine these cases critically and make a decision whether or not they are appropriate for daily penalty action and then seek approval from the authorised officer.

Once approval from the authorised officer has been obtained, you should proceed as follows.

  • Issue the warning letter SA515 to the taxpayer (for partnerships SA518) with a copy to the agent (if there is one acting).
  • Send the completed application form (available on SEES) to the Tribunals Service making clear on the form that the application is for a ‘without notice’ hearing, see ARTG7530. The taxpayer has no right to attend that hearing and no notification from the Tribunals Service will therefore be required.
  • If, at the date of the tribunal hearing, you are satisfied that the return form is still outstanding, prepare two copies of form SA516 (for partnerships SA519) ready for signature by the tribunal. The name of the officer and signature on these forms should be that of the authorised officer even if the authorised officer does not attend or request the direction at the tribunal hearing.
  • At the tribunal hearing you should give evidence of the issue of the return notice and report that the return form has not been received. Although the tribunal does not determine the amount of the penalty, they should be told the proposed daily rate.
  • If a direction is given, you should give one copy of the signed form to the Tribunal Service and retain the other in your papers. You should, immediately following the meeting, issue letter SA517 to the taxpayer (for partnerships SA520) with a copy to any agent. If for any reason the issue of this letter is delayed, the date from which the daily penalties begin to run (effectively, the day after the taxpayer receives this notice) will also be delayed.
  • Once the 14-day period referred to in SA517 (for partnerships SA520) has expired you should make arrangements for the determination of daily penalties but should, even at this late stage, be prepared to consider sympathetically any representations made by the taxpayer or agent. You should also be prepared to make an informal approach if you think that is likely to help with submission of the return.
  • For individuals prepare form SA521 (for partnerships SA522).

When you complete the SA521 you will need to select S93(3) for the type of penalty, the SA522 only relates to S93A(3). LFC will then automatically insert the appropriate words in the details space. You will need to enter the amount of the penalty, the amount per day, the start/end dates and the number of days. The period to be covered runs from the day following the day the taxpayer receives the formal notification of the tribunal’s direction (the SA517/SA520) up to, normally, the working day before the date of issue of the penalty notice.

Issue the SA521 or SA522 to the taxpayer with a covering letter and payslip. Your covering letter should

  • refer to your previous correspondence
  • say you are enclosing a formal notice imposing the penalty
  • say you are enclosing a payslip (PS1(AZ) or PS1(BZ)), and
  • remind the taxpayer that if the failure continues you will consider the imposition of further penalties.

Issue a copy of your letter to the agent, if there is one, and keep a copy of the letter and SA521 in your papers.

Include the penalty on the taxpayer’s statement of account using ‘Create Sundry Charge’. In the ‘charge due date’ field enter the due and payable date for the penalty. This will be 30 days from the date of issue of the penalty notice (TMA 70/S100A(2)).