CH401220 - Charging Penalties: introduction: penalties for failure to file on time - Schedule 55 Finance Act 2009

FA09/Sch55 introduced penalties where a person fails to file certain returns or other documents by the appropriate deadline.

For details of the commencement date for these penalties and the taxes to which they relate, see CH61120. Where offshore matters are concerned, see CH62260.

At present, the taxes affected are

• Income Tax (including Registered Pension Scheme returns)
• Capital Gains Tax
• Bank Payroll Tax
• Construction Industry Scheme (CIS).

There are specific rules depending on which tax the return or other document involves. The specific rules are called penalty models, see CH62020.

A person who fails to file a self assessment or CIS300 return is charged an automatic initial fixed penalty on the day after the filing date (the penalty date). They are automatically charged further penalties where the failure continues beyond the penalty date.

If the failure continues beyond 12 months after the penalty date a minimum automatic further penalty is charged. However, higher behavioural penalties can be charged where

• by failing to file the return the person deliberately withheld information

and

• the information withheld would enable or assist HMRC in assessing the person’s correct tax liability.

Penalties are based on any liability to

• tax (income tax and capital gains tax) which would be shown in the return
• make payments (CIS deductions) which would be shown in the return, though there are fixed penalties where a contractor makes only gross payments.

A person does not have to have filed a tax return before you charge a behavioural penalty.

In this manual we refer to the figures upon which behavioural penalties are based as the liability to tax (LTT), or, for CIS cases, liability to make payments (LTMP).

When you are checking a failure to file a return

• that has continued for more that 12 months

and

• where there has been a withholding of information

you must establish the behaviour that led to the withholding of information to determine if the person is liable to a behavioural penalty. It is not enough to establish that the person deliberately failed to file their return. The additional test of deliberate withholding of information that would help us assess the person’s true tax liability is required.

A penalty will be payable unless the person has a reasonable excuse for the failure, see CH61500.

You should be familiar with the contents of the technical guidance that starts at CH60000, which sets out what taxes and tax periods FA09/Sch55 applies to, in what circumstances a penalty is payable, and who is liable to pay it.

This guidance is about how you establish the evidence for, calculate and charge behavioural penalties. For guidance about automatic penalties, see SAM61200 for guidance on the IT/CGT automatic penalties and CISR65000 for guidance on the CIS automatic penalties.

Behavioural penalties must be recorded and authorised in a Penalties Decisions and Actions Checklist (PDAC), see CH407100, and on the National Penalty Processing System, see CH401250.

The link below takes you to the legislation for penalties for failing to file on time.

Schedule 55 Finance Act 2009