MTT55430 - Administration: Compliance: Penalties: Penalties relating to the information return

If a group is registered for MTT, the filing member is obliged to submit either an information return or an overseas return notification to HMRC for each period (see MTT52000). If it fails to meet this obligation within the time limit, it will be liable to a penalty.

If the information return has been submitted to another qualifying authority, the filing member may be able to submit an overseas return notification to HMRC rather than an information return.

Therefore, a group will be liable to a penalty relating to an information return in the following cases:

  • it has not submitted the information return to HMRC or any other qualifying authority.
  • it has submitted the return to another qualifying authority, which discharges its obligation to submit an information return to HMRC, but it has failed to either submit an information return or make an overseas return notification to HMRC.

The penalty charged will be the same in each case.

There will not normally be any partial mitigation of a penalty charged for failure to submit a return or notification on time. These penalties will apply automatically once the due date has passed, unless there is a reasonable excuse.

This is set out in paragraph 42, schedule 14 to Finance (No.2) Act 2023.

Amount of the penalty

The amount of penalty varies according to how long after the filing date the filing member submits the return or notification.

The penalty is: 

  • £100, if the filing member submits the return or notification within 3 months of the filing date.
  • £200, if the filing member submits the return or notification within 6 months of the filing date.
  • if the return or notification has not been submitted after 6 months, £200 plus £60 for each day after 6 months up to the day the return or notification is submitted.

However, the penalties will increase if a group: 

  • was obliged to submit an information return or overseas return notification for three consecutive accounting periods,
  • received (through a filing member) a penalty relating to the information return for each of the first two of those periods, and
  • isliable (through a filing member) to a penalty for the third period.

If these conditions are met, the amount of the penalty for the third period (and any subsequent consecutive periods) will increase to: 

  • £500, if the filing member submits the return or notification within 3 months of the filing date.
  • £1000, if the filing member submits the return or notification within 6 months of the filing date.
  • if the return or notification has not been submitted after 6 months, £1000 plus £60 for each day after 6 months up to the day the return or notification is submitted.

These higher amounts are applicable to failures occurring in all successive accounting periods until the filing member submits its return or notification for an accounting period by the filing date. If the filing member then fails to submit its return or notification on time for the next accounting period, the lower rates apply. 

Example 

Filing member ‘A’ submits returns or notifications for the group’s accounting periods as follows: 

Accounting period ended

Filing date

Date return or notification actually submitted 

Penalty under FA23/SCH14/PART11/PARA 42 

31 December 2024

30 June 2026 (i.e. 18 months after end of first accounting period)

1 month late (i.e. filing made on 31 July 2027)

£100 

31 December 2025

31 March 2027  (i.e. 15 months after end of accounting period)

4 months late (i.e. filing made on 31 July 2027)

£200 

31 December 2026

31 March 2028 (i.e. 15 months after end of accounting period)

1 month late (i.e. filing made on 30 April 2028)

£500 (3rd consecutive accounting period) 

31 December 2027

31 March 2029 (i.e. 15 months after end of accounting period)

7 months late  (i.e. filing made on 31 October 2029)

£1,000 plus £1800 (i.e., £60 for each of the 30 days between 1 October and 30 October 2029 (inclusive) on which the filing member failed to submit the return or notification)

31 December 2028

31 March 2030 (i.e. 15 months after end of accounting period)

On time 

Nil 

31 December 2029

31 March 2031 (i.e. 15 months after end of accounting period)

4 months late (i.e. filing made on 30 June 2031)

£200 

31 December 2030

31 March 2032 (i.e. 15 months after end of accounting period)

1 month late (i.e. filing made on 30 April 2032)

£100 

31 December 2031

31 March 2033 (i.e. 15 months after end of accounting period)

1 month late (i.e. filing made on 30 April 2033)

£500 (3rd consecutive accounting period) 

  
Reasonable excuse

The filing member may make a claim that there is a reasonable excuse for not submitting the return or notification. When HMRC accepts a claim, a penalty is not charged. When a Tribunal has determined following an appeal that there was a reasonable excuse, HMRC will withdraw any penalty notice.

Insufficiency of funds is not a reasonable excuse.

If the filing member is reliant on another person to meet the obligation, it can only use this as a reasonable excuse if it has itself taken reasonable care to avoid the failure.

When a reasonable excuse ceases, the excuse will be treated as continuing if the filing member remedies the failure without unreasonable delay.

See CH160000 for further guidance on reasonable excuse.

Assessment and notification of penalty 

HMRC charge penalties relating to the information return by formal assessment. Where a penalty is assessed, HMRC will issue a penalty notice to the filing member stating:

  • the amount of the penalty,
  • the date of issue, and
  • the time during which an appeal can be made.

The assessment of a penalty is to be treated for procedural purposes in the same way as an assessment to tax. It may be enforced as if it were an assessment to tax and can be combined with an assessment to tax. See FA23/SCH14/PART11/PARA42.

Time limits

An assessment of a penalty relating to the information return must be made before the end of the period of 12 months beginning with: 

  • the end of the appeal period for the assessment of the liability to tax which would have been shown in the return, or 
  • if there is no such assessment, the date on which that liability is ascertained, or it is ascertained that the liability is nil.

Appeal period

‘Appeal period’ refers to the period during which the filing member: 

  • could appeal, or 
  • has made a valid appeal that has not been determined or withdrawn. 

Liability and payment

A penalty relating to the information return is raised against the filing member and does not attract interest charges.

A penalty relating to the information return must be paid within 30 days of the day on which notification of the penalty is issued. 

Payments received by the filing member will be ignored for corporation tax purposes if:

  • the payment is received from a company (or companies) within the charge to corporation tax,
  • the payment is received as part of an agreement between the filing member and that company (or companies) to reimburse or indemnify the filing member in respect of a penalty relating to the information return, and
  • the payments do not, in total, exceed the amount of the penalty.

Appeal

A filing member may appeal against a penalty. Once appealed against, the collection of a penalty is postponed. This means that no action can be taken to collect a penalty while it remains under appeal.

Reduction in special circumstances

HMRC has discretion to reduce a penalty because of special circumstances. All the guidance on special reduction for all relevant taxes is in a separate chapter at CH170000.