Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
Updated
, see all updates

Interest, penalties and surcharge: penalties: control penalties

Background

Penalties are applied automatically by the system in line with legislation. The function VIEW/CONTROL PENALTIES allows the inhibition of penalties, however this should only be used in limited circumstances, see below.

Inhibition could be considered where

  • It is a serious complaint case
  • The customer is seriously ill or incapacitated and is unable to complete their return and / or make a payment on time. For example, suffering from dementia and waiting for Power of Attorney to be granted
  • An appeal is under review by the Appeals Review Unit (ARU)
  • Special reduction has been approved by Central Policy, Tax administration Advice (TAA)

Inhibition should not be considered where an appeal is going to a tribunal. The only exception to this is where the appeal relates to an ongoing request for ESCA19/ REG72 (2). Where this applies, the function VIEW/CONTROL PENALTIES can be used to inhibit any further late payment penalties being issued for that year. Note: The inhibition would normally stay in place even when the appeal has been settled, whether in favour of the customer or HMRC.

Inhibit penalties

The VIEW/CONTROL PENALTIES function allows the inhibition of penalties which will stop the issue of any additional penalties that may become due for a specific tax year. This is both

  • Penalties that are not yet due to be charged

And

  • Further penalties that may become due in respect of a penalty already charged

You can inhibit either, or both, late filing penalties and late payment penalties. When inhibiting filing penalties these include late filing fixed penalties (see SAM61220), late filing daily penalties (see SAM61230) and late filing (tax geared) penalties (see SAM61240). Note: Inhibiting late filing penalties will also stop the issue of any late filing daily penalty reminder letters being issued (see SAM61230).

For guidance on how to inhibit future penalties, see subject ‘Inhibiting future penalties for tax years 2010-2011 onwards’, Action Guide (SAM61341).

Example

Tax return is received 31 January showing a tax liability of £24,000, however no payment is made.

A first late payment penalty of £1200 (£24000 x 5 per cent) is charged in March.

In April, payment penalties are inhibited.

An amendment is received to the tax return in May which increases the tax liability to £26000. This would have resulted in a further first late payment penalty of £100 (£2000 x 5 per cent) being raised, however this is not issued as the payment penalties are inhibited.

Note: If an individual is a member of partnership, the inhibition of late filing penalties will not prevent the issue of any penalties in respect of the late filing of a partnership return.

Inhibit penalties for a partnership

It is possible to inhibit late filing penalties for a partnership using function VIEW/CONTROL PENALTIES. This will prevent the issue of any additional late filing penalties that may become due for a specific year on all partners in the partnership. This is both

  • Penalties that are not yet due to be charged

And

  • Further penalties that may become due in respect of a penalty already charged

Note: This will also stop the issue of any late filing daily penalty reminder letters being issued (see SAM61230).

Note: You will not be able to inhibit late filing penalties for a particular partner in a partnership. You can only inhibit late filing penalties for all partners in a partnership.

Removal of an inhibition

If the inhibition is removed using the function VIEW/CONTROL PENALTIES, the system will automatically review the penalty situation the next time the penalty run takes place, and the system will issue any penalties due including those not already raised because the inhibition was previously in place.

Reductions to penalties during an inhibition period

Although the inhibition of the penalties, either filing penalties and / or payment penalties, will prevent the issue of any further penalties, it will not prevent the reduction of a penalty already issued. For example, if an amendment is received to a tax return which reduces the tax liability, and the first late filing (tax geared) penalty has already been issued, the reduced penalty will be reflected on the statement even where late filing penalties have subsequently been inhibited.