HMRC internal manual

Self Assessment: the legal framework

Self Assessment Tax Returns: other taxpayer obligations: requirement to notify chargeability

Taxpayers who do not receive a tax return are required to notify chargeability to income tax or capital gains tax

Section 7(1)

Self Assessment is a system for dealing with tax returns and claims. It applies to taxpayers who are identified as requiring a tax return and who are issued with a notice to file or a paper self assessment tax return incorporating a notice to file. It also applies to people who make a claim outside a tax return.

HMRC is not always able to identify who needs a tax return so there is a requirement to notify chargeability. Any person who has not been required to complete a tax return, but who nonetheless has profits or chargeable gains on which tax is due must notify an officer of the Board that they are chargeable to tax.

Time limit for notification

The time limit for notifying chargeability is six months from the end of the tax year in which the tax liability arises. Notification must be received on or before 5 October.

The six-month time limit ensures that the taxpayer can be sent a tax return in sufficient time to complete it within the normal return cycle for the year. There is a separate requirement (and a separate penalty for failure) to notify HMRC for the purposes of National Insurance (Regulation 87A of the Social Security (Contributions) Regulations 2001 - SI 2001/1004).

Exceptions to the requirement to notify chargeability

Section 7(3) to (7)

There are exceptions to this requirement. These are where the taxpayer has no chargeable gains (or such gains as there are do not exceed the annual exempt amount), and either:

  • has no net liability to income tax for the year, or
  • has had sufficient tax deducted at source to meet the net income tax liability for the year.

Penalties for failure to notify chargeability

Schedule 41 FA 2008

The taxpayer is liable to a financial penalty if notification is not made within the six-month time limit. The maximum penalty is the net amount of tax due, but unpaid, at 31 January following the tax year in which the liability arises.

This means that even if notification is made after the six-month time limit the penalty can be eliminated if the taxpayer pays the full amount of the tax due on or before 31 January. Where any penalties do arise they are assessed by HMRC in an amount not exceeding the tax unpaid.