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HMRC internal manual

Enquiry Manual

Penalties: Failure to Make a Return for SA Years: Daily Penalties - Continuing Amounts


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.

Once the reminding letter has been issued and it looks as if the return will not be forthcoming, a decision on further penalty action has to be taken by the S100(1) authorised officer EM5320+.

They should review the information in the file. Why is it thought that the return has not been received? Is it because the taxpayer finds the form and its notes daunting or is it that the taxpayer never quite got around to assembling the information and filling in the return or is the taxpayer content to pay the penalties because these are substantially less than the duties due?

Have attempts been made to collect the penalties and what other amounts are outstanding? Contact with the taxpayer in person or by telephone EM4573 may suggest the reason why the return has not been completed. An alternative to further daily penalties is an “HMRC determination” in an appropriate amount. An HMRC determination TMA70/S28C, EM2027, has the advantage that it brings duties into charge, can only be displaced by the completed return and sets the level of the in-year payments for the following year.

The Authorising Officer is responsible for ensuring that the imposition of daily penalties does not get out of proportion. Bearing in mind that our objective is to encourage compliance but not be oppressive, a considered judgement has to be made whether to take no further action (in effect acquiescing with the non-receipt), or to make further daily penalty determinations and/or HMRC determinations.

Factors to take into account are the likely level of income and gains, whether repayments would be due if determinations were displaced, and the likely level of any penalty due under Section 93(5) which is based on the Section 59B amount due if a proper return had been delivered on the filing date (Section 93(9)).

This review must be repeated at each cycle of daily penalties. The cycle should be repeated at reasonably short intervals, so that a situation is not allowed to develop where wholly disproportionate amounts are imposed leading to pleas for TMA70/S102 mitigation.

If for any reason the EM5320+ authorised officer is faced with a case of a long interval since a previous batch of daily penalties and needs to constrain the total amount to avoid a disproportionate figure, they should do so by

  • maintaining or increasing the £ per day to reflect the increasing seriousness of the continuing delay, but
  • imposing penalties for a shorter period of days, beginning as always with the day after that for which the last penalty was imposed, but not following through to “yesterday’s” date. At the review for the next cycle (which should be done promptly) they should if necessary impose further penalties for a period to close this gap in appropriate and proportionate stages.

For example, if a first round of daily penalties is imposed at £20 per day for each of 3 outstanding returns for 30 days ending with 31/12/06, and for some reason the authorised officer does not see the case again until 02/01/08, the papers might well indicate that penalties of £25x3x366=£27,450 would be disproportionate. Instead, penalties of £25x3x59=£4,425 covering the period 01/01/07-28/02/07 might be the appropriate first step, followed a month later by say £30x3x61=£5,490, covering the period 01/03/07 to 30/04/07, and - if necessary and all other efforts having proven ineffective in securing the returns - so on.

If continuing daily penalties are to be imposed prepare a form SA521 for individuals or a form SA522 for a partnership return EM4570.