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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
Updated
, see all updates

Interest, penalties and surcharge: penalties: late filing daily penalties for 2010-11 returns onwards

General

The filing date for a return is usually

  • 31 October for paper returns

Or

  • 31 January for online returns and for those customers who are unable to file online for technical or operational reasons

If the return is not filed three months after the return due date, daily penalties will start to accrue. Daily penalties will be charged at £10 per day up to a maximum of 90 days. If the return is filed during the 90 days, the £10 per day daily penalty will be charged up to and including the date the return was filed. Daily penalties are also applicable to partnerships and chargeable on each partner in the partnership.

Warning and imposing daily penalties

If the return is still not filed 30 days after daily penalties have started to accrue, then a daily penalty reminder will be issued (form SA372-30 for individual / trust / company or form SA373-30 for a partnership). This will advise that over £300 daily penalties have already accrued and that the return should be filed as soon as possible.

If the return is still not filed 60 days after daily penalties have started to accrue, a further daily penalty reminder will be issued (SA372-60 for individual / trust / company or form SA373-60 for a partnership). This will advise that daily penalties are now over £600 and that the return should be filed as soon as possible.

If the return is still not filed 90 days after daily penalties have started to accrue, then a £900 notice of penalty assessment, which includes a payslip, will be issued (form SA370 and notes for individual / trust / company or form SA371 and notes for a partnership).

If the return is filed (or a return charge created) during the 90 day period during which daily penalties are accruing, a notice of penalty assessment will be issued showing the total charge of £10 per day from the day daily penalties started to accrue up to and including the day the return was received.

Example 1

06/04/2011 2010-11 return issued
   
31/10/2011 Paper filing date
31/01/2012 Online filing date
01/05/2012 Daily penalties commence
16/06/2012 Return filed online

A daily penalty reminder will be issued in June 2012 showing that over £300 daily penalties have accrued. After the return has been filed, a notice of penalty assessment will be issued showing a charge of £470, calculated at £10 per day for 31 days in May 2012 plus 16 days in June (up to and including 16/06/2012).

Example 2

23/11/2011 2010-11 return issued
   
29/02/2012 Paper filing date
30/05/2012 Daily penalties commence
20/06/2012 Paper return filed

A notice of penalty assessment will be issued showing a charge of £220, calculated at £10 per day for 2 days in May 2012 plus 20 days in June 2012 (up to and including 20/06/2012).

Forms SA370/371 are flexible notices of penalty assessment that can cover more than one penalty if being selected by the system at the same time. For example, if a late filing (tax geared) penalty is selected at the same time as a daily penalty and a late payment penalty, they will all be shown on the same form.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Only a copy of the notice of penalty assessment (not the daily penalty reminder or the notes) will be sent to the customer’s agent where the 64-8 signal is set.

An appeal can be made within 30 days from the date of issue of the notice of penalty assessment. An extra 7 days, over and above the 30 days described in the legislation, are allowed for printing and despatch.

Automatic imposition

From April 2012, the system will automatically warn about, and impose, daily penalties for late 2010-11 returns weekly. Over time the system will be able to automatically warn about, and impose, daily penalties for a maximum of four ‘in-date’ tax return years. For example, in 2014-15 the system can still automatically warn about, and impose, daily penalties if the return for the tax year 2010-11 is late.

The system will not automatically warn about or impose daily penalties if the customer is subject to

  • Bankruptcy

Or

  • An Individual Voluntary Arrangement

If the return is outstanding but the address on the record is RLS, the system will not issue a daily penalty reminder or notice of penalty assessment. However, once the RLS status is clear, the notice of penalty assessment will be issued when the next penalty run takes place (but not the daily penalty reminders). The only exception to this is if an up-to-date address is found but the penalty relates to a year prior to the four ‘in-date’ tax return years. The system is unable to issue the penalty and this will need to be issued clerically, see subject ‘Penalties: clerically raising penalties for years prior to CY-4 (SAM61280).

Interest

Interest will be charged if the penalty is not paid 30 days after the issue of the notice of penalty assessment.

SA Notes

An automatic SA note is added to the SA record for individuals, including partners in partnerships, and trusts when a 30 day penalty reminder or 60 day penalty reminder is issued.

The SA note for a 30 day reminder for individuals/trusts will show ‘30 day daily pens warning letter issued [date] for [year]’ and the 60 day reminder will show ‘60 day daily pens warning letter issued [date] for [year]’.

The SA Note for a 30 day reminder for partnerships will show ‘30 day p’ship daily pens warning letter issued [date] for [partnership UTR] for [year]’ and the 60 day reminder will show ‘60 day p’ship daily pens warning letter issued [date] for [partnership UTR] for [year]’.

An automatic SA note is not created when the actual notice of penalty assessment has been issued.

Statement of account

Where daily penalties are accruing, the message ‘Daily pens accruing’ will be displayed on all statements.

The message is removed when the daily penalty charge is created on the SA statement.

The daily penalty charge will be created the next time the weekly penalty batch runs after:

  • The return has not been filed 90 days after daily penalties have started to accrue

Or

  • The return has been received

Or

  • Function CREATE RETURN CHARGE has been used

Notes:

1. For partners in a partnership where both the individual (partners) return and partnership returns are outstanding, the message will not be removed until both returns are received.
   
2. If daily penalties are accruing and the return due date is deferred, the ‘Daily pens accruing’ indicator will not be reviewed automatically. This means that it may be possible that the indicator will still be showing on the record even though daily penalties are no longer accruing because the due date has now been deferred. However the indicator will be removed either when the return is received or where daily penalties have been accruing for 90 days, based on the deferred due date.

Automatic repayment inhibition

Whilst daily penalties are accruing, if a repayment is requested automatically, either on a return or through a Structured Action Request (SAR) claim to repayment, the repayment will not be made. An entry will not be made on the work list ‘W030 - Inhibited Automatic repayments’. For requests made through a SAR, an SA note will be made to show that the repayment has not been made, for the wording, see SAM110250. Once the penalties have stopped accruing, the repayment situation will not be revisited and any credits will remain on the statement.

If a customer, or their agent, requests a repayment and daily penalties are accruing, you can issue the repayment clerically using function ISSUE REPAYMENT FROM OVERPAID BALANCE. When the function is accessed, a warning message is displayed saying ‘Daily penalties are accruing’.

If the request is made by telephone, advise the caller that daily penalties are accruing for which a penalty charge will be created. Ask them to submit the outstanding return and before repaying, ask if they want us to retain part, or all, of the overpayment on the statement to cover the future penalty charge.

If the request is made in writing you can ignore the warning message and make the repayment.

Note: For partners in a partnership the inhibition will remain in place until both the individual (partners) return and the partnership return are received.

Paper returns

Daily penalties will start to accrue three months after the paper filing due date so will usually start to accrue from 1 February. However, as the method of filing is not known until we actually receive the customer’s tax return, we can only assume that a customer is going to file online and that daily penalties will start to accrue as from 1 May (three months after the online filing date). So if a customer files their return on paper after 1 February (where the paper filing date is 31 October) we will only send the notice of penalty assessment detailing the actual daily penalties charged. Daily penalty warning letters won’t be issued.

Example

2010-2011 return paper filing due date 31/10/2011
   
Returned filed on paper 18/04/2012

Daily penalties will have accrued during the period 01/02/2012 to 18/04/2012. Daily penalties charged £780 (78 days).

If the customer had filed their return online, they would have avoided penalties.

Manually applying Partnership daily penalties

If an individual is a member of a partnership in a particular year but they were not identified as such until after the daily penalty has been charged on the partnership, you will need to apply the penalty clerically. You can do this by creating a miscellaneous penalty charge using function CREATE SUNDRY CHARGE on the partner’s record.

You also need to consider whether you should manually raise a late filing fixed penalty (see SAM61220) or late filing (tax geared) penalties (see SAM61240) dependent on when the partner is linked to the partnership and how late the partnership return is. If more than one penalty is chargeable then separate charges must be created. Note: You may also need to consider manually issuing daily penalty reminders if daily penalties are accruing and a notice of penalty assessment has not been issued.

For more information about manually raising penalties see subject ‘Manually raising a penalty’ (SAM61280 onwards).