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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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Returns: individuals returns: repairing returns after 31 December: individuals

Late payment penalties are imposed for tax years 2010-2011 and later, under Schedule 56 Finance Act 2009, in addition to interest on tax and Class 4 NIC paid late, to encourage prompt payment. For tax years 2009-2010 and earlier, surcharge was imposed under Section 59C(1) TMA 1979).

Late payment penalties apply to any amount outstanding 30 days after the due date for payment (surcharges apply to any amount outstanding 28 days after the due date of payment). For a balancing payment the due date for payment is normally 31 January following the end of the return year or 3 months and 7 days from the date of issue of the return where issued after 31 October.

If a repair(s) to the return is necessary during processing and the repair increases the liability, the statutory due date for payment of the additional tax arising from the repair is the later of the original due date or 30 days from the date the taxpayer is issued with the Tax Calculation advising him of the revision (repair).

Late payment penalties are due on the additional tax arising from the repair 30 days after the statutory due date. For tax years 2009-2010 and earlier, surcharge is due on the additional tax arising from the repair 28 days after the statutory due date. (The statutory due date is either 30 days from the date the taxpayer is issued with the Tax Calculation or the balancing payment due date, whichever is the later).

Further guidance regarding relevant dates for interest purposes is available in ‘Amending The Relevant Date’ (SAM60050).

Further guidance regarding surcharge and the effects of amending the relevant date for interest can be found at SAM62030, and late payment penalty and the effects of amending the relevant due date for interest at SAM61350.

If you are processing returns after the 31 December following the end of the return year special attention should be given to cases where a repair is necessary which would increase the taxpayer’s liability (This content has been withheld because of exemptions in the Freedom of Information Act 2000)  (This content has been withheld because of exemptions in the Freedom of Information Act 2000) and no repayment is due. The amount of late payment penalty/surcharge will be incorrect if the return is processed normally.

If the repair decreases the liability or where the repair will result in a reduced overpayment due no special action is required and the return can be processed as normal.

The computer cannot work out the amount of additional liability attributable to the repair(s) and will only hold one due and payable date for the total liability. Therefore if the return is processed normally after 31 December and repairs made which increase the liability, late payment penalty will be applied to any amount outstanding from the total liability 30 days from the original due date and not be applied separately to any amount outstanding from the additional liability attributable to a repair(s). For years 2009-2010 and earlier, surcharge would be applied 28 days from the original due date.

After 31 December where a repair to the return would increase the liability (This content has been withheld because of exemptions in the Freedom of Information Act 2000) and no repayment is due, the return must be processed in function CAPTURE RETURN, or the liability entered in function CREATE RETURN CHARGE, without any repair. It will be necessary for you to over ride error messages displayed during capture in function CAPTURE RETURN and accept the taxpayer’s figure (SAM121265).

Further information is available on when you should use function CREATE RETURN CHARGE instead of function CAPTURE RETURN see subject ‘When to use function CREATE RETURN CHARGE’ (SAM121650).

Note: If the taxpayer’s version resulted in an overpayment, and the repair will result in a liability (This content has been withheld because of exemptions in the Freedom of Information Act 2000) , set the No Repayment signal when processing the taxpayer’s version. The signal should then be removed when processing the repaired version.

A Customer Service Message (SAM121435) should be included in any case where the taxpayer has requested Revenue Calculation to tell the taxpayer that you have identified an entry or entries that require revision and that you will deal with the revision(s) as soon as possible.

On the following day or as soon as possible, you must then use function AMEND RETURN, where CAPTURE RETURN was used originally, to amend the entry or entries that you have identified can be repaired. Do not select repair messages or enter Customer Service Messages because the Tax Calculation includes the words ‘For reasons explained in my letter….’.

You must

  • Record the change as a ‘Correction’
  • Send a letter of explanation to the taxpayer

With one exception if function CREATE RETURN CHARGE was used to enter the liability without repair(s), you must use the function the following day if still applicable, to enter the amended liability following repair.

The exception is where function CREATE RETURN CHARGE was used to enter the liability because the computer could not calculate the liability but the repair(s) you are to make means that the computer can now calculate the liability. In this particular situation you must use function AMEND RETURN to enter the revised details.

This course of action will ensure that the late payment penalty (surcharge for years 2009-2010 and earlier) is applied to any amount outstanding from the additional liability after the due date for the additional tax due caused by the repair(s) at the correct date.

Example 

2010-11 tax return is being processed in function CAPTURE RETURN on 22 January 2012.

Repairs are identified that would increase the taxpayer’s liability from £1500.00 to £1800.00. No repayment is due.

The return was issued in April 2011 and the balancing payment due date is 31 January 2012.

If the return is processed normally and repairs made, a late payment penalty will be applied incorrectly to any amount of the £1800.00 outstanding 30 days after 31 January 2012.

If the return is processed without repairs on the 22 January and function AMEND RETURN is then used to enter the repaired amounts, a late payment penalty will be correctly applied to

  • Any amount from the £1500.00 outstanding, 30 days after 31 January 2012

And

  • Any amount outstanding from the additional £300.00 arising from the repair, 30 days after the due date for the additional amount (30 days from date of issue of the Tax Calculation)