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HMRC internal manual

Enquiry Manual

Penalties: Time Limits: General


All penalty action is subject to time limits. If the relevant time limit has expired then you cannot

  • proceed for a penalty before the tribunal, or
  • determine a penalty formally, or
  • include a penalty in a negotiated contract settlement other than by way of voluntary restitution.

For these reasons you must

  • review your working enquiry cases with a view to making protective assessments
  • avoid the premature issue of a closure notice, or premature determination of an appeal against a discovery assessment or against an amendment to a self assessment, and
  • settle the case as quickly as possible by reviewing for formal penalty action once the closure notice has been issued and/or any appeals against discovery assessments or self assessment amendments have been determined.

Where a penalty is tax geared the time limit for penalty proceedings or determination is within

  1. six years after the offence was committed, or
  2. if later, three years after the tax on which it is based was finally determined.

For non tax geared penalties the time limit is within six years after the date on which the offence was committed.

Section 16(1)(b) Social Security Contributions & Benefits Act 1992 applies all the time limits to Class 4 NIC.

Under Section 118(4), the amount of tax covered by any assessment or self assessment is not finally determined until the assessment or self assessment can no longer be varied, whether by the tribunal on appeal or by the order of any Court (see the Court of Appeal judgement in Salmon v Havering Commissioners & CIR 45TC77). It follows that a demand for a stated case under TMA70/S56 will keep open the time limits until the final order of the Courts or the prior settlement of the appeal.