CH413110 - Charging Penalties: amending penalties: amending late filing penalty charges
Once you have charged a behavioural penalty for a deliberate withholding of information when a person has not filed certain returns on time, you may need to amend it without there being an appealable decision.
The liability to tax, or the liability to make payments in CIS cases, on which the penalty is based can change because the person either files a return that displaces a determination, or amends their return.
There could also be adjustments because of
- changes to the automatic late filing penalties charged in the Computerised Environment for Self Assessment (CESA), or Construction Industry Scheme Reform (CISR)
- interaction with other penalties charged on the same tax.
Example 1 - return replaces determination
You have information that William has disposed of a chargeable asset and you make a determination of £100,000 tax in the absence of his return for 2012-13 which is now 14 months late.
You charge a 70% late filing behavioural penalty. A penalty of £70,000 is raised on NPPS. It is adjusted by the automatic penalty at 12 months charged on CESA of £5,000, being 5% of the liability to tax that would have been shown on the return, and a further assessment is issued from NPPS for £65,000.
| 12 month further penalty at 70% of £70,000, for deliberately withholding, but not concealing, information | £70,000 |
| Adjustment to the tax-geared penalty for the 12 month automatic penalty of 5% of the £100,000 determination. | -£5,000 |
| Penalty assessment issued by NPPS | £65,000 |
William submits his return showing liability of £80,000 to displace the determination. You accept this is correct. The 70% penalty is now £56,000. You amend the penalty assessment you made to £56,000 and adjust it by the automatic penalty at 12 months charged on CESA which is now reduced to £4,000, being 5% of the liability to tax shown on the return. A revised penalty assessment is issued for £52,000.
| 12 month further penalty re-calculated on receipt of return to 70% of £80,000 liability as shown on the return | £56,000 |
| Adjustment to the tax-geared penalty for the 12 month automatic penalty of 5% of the £80,000 liability as shown on the return | -£4,000 |
| Amended penalty issued by NPPS | £52,000 |
Note that automatic penalties will already have been charged on CESA as follows
| Day after penalty date | £100 |
| £10 daily penalties for maximum 90 days | £900 |
| 6 month further penalty | The greater of £300 or 5% of liability |
In this example the 6 month further penalty which was £5,000 (5% of £100,000) is now reduced on CESA to £4,000 (5% of £80,000).
Example 2 - amended return
Derek submits his 2012-13 return 13 months late. The return shows a liability to tax of £10,000. A 50% late filing behavioural penalty is agreed and a penalty of £5,000 is raised on NPPS. It is adjusted by the automatic penalty at 12 months charged on CESA of £500, being 5% of the liability to tax shown on the return, and a further assessment is issued from NPPS for £4,500.
| 12 month further penalty at 50% of £10,000, for deliberately withholding, but not concealing, information. | £5,000 |
| Adjustment to the tax-geared penalty for the 12 month automatic penalty of 5% of the £10,000 liability as shown on the return. | -£500 |
| Penalty assessment issued by NPPS | £4,500 |
Two months after the penalty assessment is issued from NPPS Derek files his 2013-14 return. The return includes a claim for loss relief to be carried back to 2012-13 which reduces the 2012-13 tax liability to £5,000. The 50% penalty is now £2,500. You amend the penalty assessment you made to £2,500 and adjust it by the automatic penalty at 12 months charged on CESA which is now reduced to the fixed amount of £300. A revised penalty assessment is issued for £2,200.
| 12 month further penalty re-calculated on receipt of loss claim to 50% of £5,000 liability as shown on the return. | £2,500 |
| Adjustment to the tax-geared penalty for the 12 month automatic penalty of £300. | -£300 |
| Amended penalty issued by NPPS | £2,200 |
Note that automatic penalties will already have been charged on CESA as follows
| Day after penalty date | £100 |
| £10 daily penalties for maximum 90 days | £900 |
| 6 month further penalty | The greater of £300 or 5% of liability |
In this example the 6 month further penalty which was £500 (5% of £10,000) is now reduced on CESA to the fixed amount of £300, which is greater than 5% of £5,000.
For guidance on interaction with other penalties, see CH65060.
