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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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Interest, penalties and surcharge: penalties: appeals against fixed automatic penalties

This guidance refers to tax returns received for 2009-10 and earlier. For further information regarding the new rules for the tax years 2010-11 and later, see SAM61200 onwards.

General

Taxpayers may appeal against a fixed automatic penalty on the grounds that

  • There was a reasonable excuse for the late submission of the return
  • The fixed automatic penalty should have been reduced (capped)
  • The return was filed electronically and was rejected on or shortly before the filing date

Where you receive information or an appeal, that the taxpayer has died, see subject ‘FAP: Deceased Cases’ (SAM61040). If you receive an appeal for any other reason see business area ‘Appeals’.

The taxpayer has 35 days from the date the penalty was imposed - as shown on the SA record - in which to appeal against a fixed automatic penalty. The statutory appeal period is 30 days from the date of issue of the notice but a further 5 days are allowed for printing and despatch of the notice. Where a late appeal is received, see business area ‘Appeals’.

Any appeal received against the first fixed automatic penalty does not carry forward to the second fixed penalty. This is a separate event and a separate appeal must be made.

Record appeals against fixed automatic penalties on the taxpayer’s record and informally stand-over the penalty charge. The business area ‘Appeals’ provides further information on how to handle and record appeals.

Appeals on the grounds of ‘reasonable excuse’

SA leaflets SA355 and SA356 provide guidance to taxpayers on what is likely to be accepted as a valid reasonable excuse.

In law the penalty is collectible and enforceable whilst the ‘reasonable excuse’ appeal remains open. However in practice the fixed penalty will be informally stoodover immediately the appeal is logged.

In circumstances where the second fixed automatic penalty becomes due it will be imposed even though the first fixed automatic penalty is informally stoodover.

Most appeals against fixed automatic penalties will be received by the office within your area dealing with processing work that has responsibility for the taxpayer. Some will be received by the taxpayers’ office dealing with technical work.

However, appeals should generally be dealt with by the office in receipt of the appeal. There is no necessity to send the appeal onto the responsible processing office or technical office, except where the appeal refers to a year under enquiry or a year that was under enquiry but now closed. For further guidance on who should deal with an appeal see SAM10041.

Where any office other than a processing or technical office receives an appeal, if the SA year is or was part of an enquiry, the appeal should be acknowledged and then referred immediately to the office dealing with processing work that has responsibility for the taxpayer or relevant technical office. For more information about receipt of and logging appeals see business area ‘Appeals’.

The office dealing with the appeal should consider the appeal critically on the grounds of reasonable excuse as set out in subject ‘Reasonable Excuse’ (SAM10090) in this section and take one of the following actions

  • Allow the appeal
  • Resist the appeal

Or

  • Refer the case (This content has been withheld because of exemptions in the Freedom of Information Act 2000) for advice. Note: This form is to be used for years up to and including 2009-10 and earlier

Notes:

1. Consideration of an appeal against fixed automatic penalties should be based solely on the existence or otherwise of a reasonable excuse. Resource factors and cost-effectiveness are not valid factors in this consideration and must not be taken into account
   
2. Particular care will need to be taken when dealing with an appeal against fixed automatic penalties where the return has still not been filed
3. Where the date of receipt of the return is disputed for a paper return, it may be necessary to contact the office responsible for the batch where the paper return was captured to check the date of receipt stamped on the return

Where an appeal is received and the return has not been filed

  • Resist the appeal
  • Advise the taxpayer that the appeal cannot be dealt with until the return is filed

And

  • Ask the taxpayer to file the return or withdraw the appeal

If the return is not filed or the taxpayer refuses to withdraw the appeal, the taxpayer should be advised to apply to the Tribunal.

Appeals against penalties in partnership cases

In partnership cases all partners will be charged a fixed automatic penalty if the partnership return is not filed by the filing date. Appeals against fixed automatic penalties in partnership cases should be made by the representative partner and dealt with through the partnership record. Further guidance is available at EH870.

If you receive an appeal against a penalty on a partnership try to settle it immediately. If you cannot

  • Record the appeal on the partnership record. Use the date the penalty was imposed as the charge creation date - to find this you may have to view one of the partner’s records
  • Advise the responsible office for each partner to

    • Informally stand-over the (partnership) penalty in full (bear in mind that there may also be a penalty for late filing of the partner’s individual return which should be dealt with separately)
    • Note the item which will appear on the Review Informal Standover Work List ‘Working with Partnership’, the responsible office and UTR
  • Consider the appeal as in SAM10082

Appeals against non-capping of fixed automatic penalties

Where an appeal is received against non - capping of fixed automatic penalties - see subject ‘Fixed Automatic Penalty Record: Amending the’ (SAM61030) - check the taxpayer record. The action you then take depends on whether the return has been filed or not.

If the return has not been filed write to the taxpayer asking for the return to prove the claim and advise that the penalty remains payable in the meantime. At the same time close the appeal and remove the informal standover (for details of how to do this see Business Area ‘Appeals / Postponements’ (SAM11000)). Resume collection of the penalty.

When the return is captured, if the amount of the fixed automatic penalty is greater than the amount outstanding at the day following the filing date (from 2008, 31 October for paper returns, 31 January for online returns), the penalty will automatically be capped to the amount of the balancing payment. That is the amount that would have been payable if a proper return had been made on the filing date. (Although the taxpayer may have a return filing date of 31 October, any balancing payment and late filing penalty for the same tax year, have a due date of 31 January following.)

The following examples provide further detail

Example 1 2009-10
   
Gross tax payable per return £10,000
Less payments on account made  

31 January 2010

31 July 2010  

£4,500

£4,500    
  Further payment 31 December 2010 £920
  Total tax paid at fixed filing date (31/01/11) £9,920
  Balance outstanding at fixed filing date (31/01/11) £80

 

Return filed 1 October 2010 - fixed automatic penalties £200
 
Fixed automatic penalties should be reduced (capped) to £80, equal to balance outstanding at fixed filing date.

 

 

Example 2 2009-10
   
Gross tax payable per return £10,000
Less payments on account made  

31 January 2010

31 July 2010  

£4,500

£4,500    
  Total tax paid at fixed filing date (31/01/11) £9,000
  Balance outstanding at fixed filing date (31/01/11) £1,000
  Further payment 28 February 2011 £920
  Total tax paid £9,920
  Balance outstanding when return filed £80

 

 

Return filed 1 October 1998 - fixed automatic penalties £200
 
No reduction in fixed automatic penalties as tax outstanding at 31/01/11 is £1000

 

 

The office within your area that is responsible for processing work will deal with appeals of this nature.

 

Capping does not apply to penalties charged because of late filing of a partnership return.

Online filing

Usually returns that are filed online are validated at the time of filing. The taxpayer receives confirmation of successful filing or an error message almost immediately. But there are occasions when this does not happen and any appeal against a fixed automatic penalty should be looked at on its own merits.

If a taxpayer or agent states that a return was filed online on or before 1 February and that they suffered a delay in receipt of an error message (and a fixed automatic penalty has been charged), send details of the appeal by email to ’Appeals and Penalties, Self Assessment Online (HMRC Digital Services)’(This content has been withheld because of exemptions in the Freedom of Information Act 2000) . Note: When completing the stencil, if the UTR is copied and pasted from the record to the stencil, remove the space shown and ensure the full 10 digit number is shown before sending.