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HMRC internal manual

Self Assessment: the legal framework

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Self Assessment Tax Returns: sanctions against a failure to file a Tax Return: penalties for failure to file a Tax Return on time: returns for 2009-10 and earlier

Background

This page describes the financial penalties for failing to file a tax return on time for the tax year 2009-10 and any earlier tax year. The relevant legislation is in the Taxes Management Act 1970.

SALF208A describes the penalties for failing to file a tax return on time for the tax year 2010-11 and any subsequent tax year. The relevant legislation is in Schedule 55 Finance Act 2009.

The rules on this page apply to all returns for 2009-10 and earlier years irrespective of when the notice to make the return was issued.

There are both automatic and discretionary penalties for failure to file a tax return on time

Section 93

If the time limits for the delivery of tax returns to HMRC are not met, fixed penalties automatically arise. Additional daily penalties may also be sought and in cases of serious delay tax-geared penalties can become due.

In 1999 an appeal against a fixed late filing penalty was decided by a Special Commissioner who found that the taxpayer had a reasonable excuse for her failure to file a tax return on time. A late filing penalty can be set aside on appeal if it is found that the taxpayer had a reasonable excuse for not delivering the tax return throughout the ‘period of default’ (section 93(8)). The period of default ends the day before that on which the tax return was delivered (section 93(10)). Since this decision HMRC have accepted that a taxpayer has a reasonable excuse for not filing up to midnight on 31 January because a tax return filed at any point up to then is on time. The period of default for tax returns received on 1 February ends at midnight on 31 January. As a consequence the initial fixed late filing penalty now only arises on tax returns received more than a day after the statutory filing date, but any tax return received after that filing date is still late for all other purposes of the legislation (for example, see Time limits for notice of enquiry in SALF403).

The Special Commissioner’s case is ‘Steeden v Carver’, SpC 212.

Fixed penalties

Section 93(2) & (4)

The initial penalty is fixed at £100. If the tax return is still outstanding six months after the filing date there is a further penalty of £100 unless an officer of the Board has already applied to the tribunal for a daily penalty (see the first paragraph under Daily penalties below). These fixed penalties are determined by an officer of the Board (Section 100).

Example: Fixed penalties for late filing of tax return

The filing date for a 2007-8 tax return issued on 6 April 2008, requiring a return of income for year ended 5 April 2008, is 31 October 2008 if a paper return is filed or 31 January 2009 if the tax return is filed electronically (Section 8(1A)).

  • If a paper tax return is delivered to HMRC on or before 1 November 2008 or an electronic tax return by 1 February 2009 no penalty is charged.
  • If the tax return is filed electronically on 10 April 2009 a fixed penalty of £100 will have been imposed once 1 February (filing date plus one day) had passed. (Section 93(2) interpreted in the light of the Special Commissioner decision in Steeden v Carver, SpC 212).
  • If the tax return is filed electronically on 10 August 2009 (ie more than six months after the filing date) then a further fixed penalty of £100 will be imposed, making £200 in all (providing no application for a daily penalty has already been made: see the first paragraph under Daily penalties below) (Section 93(4)).

Restriction of fixed penalties where tax due minimal

Section 93(7)

The general rule is that the fixed penalties apply to all cases of late delivery, regardless of the tax at stake. However, they cannot exceed the tax liability for the year or the amount outstanding at the filing date. So in cases in where the tax outstanding at the filing date is less than £100 (or £200 as appropriate) the penalties are reduced. (See Fixed penalties in SALF506 about partnerships).

Example: Restriction of fixed penalties where tax due minimal

Consider the 2007-8 tax return delivered on 10 August 2009 in Example: Fixed penalties for late filing of tax return above.

  • If the tax due on 31 January 2009 is £7,500 the fixed penalties of £200 will be due in full. (Section 93(7) does not apply).
  • If the tax due on 31 January 2009 is £750 the fixed penalties of £200 will be due in full. (Section 93(7) does not apply).
  • If the tax due on 31 January is only £150 the fixed penalties will be reduced to £150. (Section 93(7) applies).

Appeals against the determination of a fixed penalty

Section 93(8)

The taxpayer may appeal against the determination of any fixed penalty by an officer of the Board, but the tribunal can only set the penalty aside if the taxpayer had a reasonable excuse for the failure that occurred during the period between the filing date and the delivery of the tax return. Any such reasonable excuse must apply for the whole period of default. It will not be sufficient for there to have been a reasonable excuse for part of the period.

Daily penalties

Section 93(3) & (6)

In addition to the fixed penalties a daily penalty of up to £60 per day may be determined if leave is given by the tribunal (although if any such penalty is determined within six months of the fixed filing date the second penalty of £100 no longer applies).

Daily penalties only apply if an officer of the Board obtains a direction by the tribunal. When that direction has been obtained daily penalties are imposed by the officer of the Board and apply for each day on which the failure continues following issue of the notice of the direction.

Section 93(6)

A daily penalty cannot be imposed if the tax return is filed before the determination of that penalty.

Tax-geared penalties may be determined in serious cases of delay

Section 93(5)

If the failure to deliver the tax return continues for more than 12 months after the filing date an officer of the Board may impose a tax-geared penalty. This penalty cannot exceed the tax liability for the year.

Right of appeal against penalty determinations

Section 100B

Although the right of appeal against the determination of a fixed penalty under this section is limited by Section 93(8) to grounds of ‘reasonable excuse’ (Appeals against the determination of a fixed penalty above) the taxpayer has the normal rights of appeal against any tax-geared penalties sought under Section 93.

Example: Daily and tax-geared penalties

The filing date for a 2007-8 tax return issued in April 2008, filed electronically is 31 January 2009 (Section 8(1D)).

Consider a taxpayer whose self assessment for the previous year showed a net tax liability for the year of £25,000.

If the tax return is still outstanding on 1 March 2009 a fixed penalty of £100 is due (since 2 February) (Section 93(2) and see the second paragraph of There are both automatic and discretionary penalties for failure to file a tax return on time above).

However, in view of the tax at stake an officer of the Board may already have decided to apply to the tribunal for a daily penalty. The officer decides the amount of the penalty and the application to the tribunal is for a direction that penalties shall be imposed. The amount of the penalties is not a matter for the tribunal. Assume that on 31 March 2009 the tribunal makes a direction that the officer of the Board may impose a daily penalty and the taxpayer receives his notification on 1 April 2009 (Section 93(3)). The daily penalty is £10.

If the tax return is still outstanding at 31 August 2009 the additional daily penalties total £1,510 (£10 for each day between 2 April 2009 and 30 August 2009). Although the delay is now more than six months an additional fixed penalty is not due (Section 93(4)(b)).

If the tax return is still outstanding at 28 February 2010, the additional daily penalties now apply for each day between 2 April 2009 and 27 February 2010). The delay is now more than 12 months and a tax-geared penalty is due (since 1 February 2009) in addition to the fixed and daily penalties already determined (Section 93(5)).