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HMRC internal manual

Enquiry Manual

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Companies: Collection: Deposit-takers, building societies and certain companies - ITA07/Part15/Chapter15: Notifying Chargeability

ITA07/S949

TMA70/S98(1) 

ICTA88/Sch13 was repealed for return periods and accounting periods beginning on or after 6 April 1999 while, for return periods and accounting periods beginning on or after 6 April 2001, returns under ITA07/Part15/Chapter15 (previously ICTA88/Sch16) are only required in restricted circumstances.

There is no specific requirement to notify chargeability but a company is obliged under ITA07/S949, without receiving a notice, to make a return within 14 days from the end of the return period if a payment is made. The return is made to HMRC.

What the return should contain is set out in ITA07/S949. Payments are normally returned on Form CT61.

Failure penalties arise under TMA70/S98(1) and are

  • an initial penalty not exceeding £300 to be determined by the tribunal, and
  • continuing penalties not exceeding £60 per day which can be imposed by HMRC. A continuing penalty cannot be imposed if the failure has been rectified.

ITA07/Part15/Chapter15 is listed in Table 2 of TMA70/S98.

The maximum penalty that can be included in a contract settlement is £300 for each return. The time limit for the penalty under TMA70/S103 is 6 years from when the return should have been submitted.

Finance Act 2001 removed the obligation to deduct tax on most inter company interest payments, and Finance Act 2002 added royalties paid under a Double Taxation Treaty before a direction is made. A company does not have to deduct tax if it reasonably believes the conditions for exemption apply.

Where a company is incorrect in that belief, TMA70/S98(4A) increases the maximum initial and daily penalties for failing to make the return under ITA07/Part15/Chapter15 to £3,000 and £600 respectively. These penalties are only chargeable where the company did not believe or could not have reasonably believed the conditions for exemption applied when making the payment. The intention of the FA2001 and FA2002 relaxation is to remove the obligation to deduct tax except for payments to individuals and certain other bodies. The higher penalties are to counter abuse of the relaxation and will only be sought where a company has intentionally tried to circumvent deduction of tax. Before seeking the higher level of penalties you should make a report with your file to contact link.