COM101140 - Penalties: penalty determinations: superseded accounting periods

This subject is presented as follows

General

Return period that is not an AP

Superseded and superseding APs sharing a common specified period

Superseded and superseding APs not sharing a common specified period

General

It is important to note that COTAX handles penalties on superseded APs in a different way to tax, as the penalty relates to the specified period (Word 27KB), not the AP.

The following examples are not intended to attempt to cover every set of circumstances which may arise.(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

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Return period that is not an AP

COTAX will only charge a penalty for a return period (Word 28KB) that is also an AP of the company.

When you supersede an AP where a penalty has already been charged, by a period during which the company is outside the charge to CT, you should discharge the penalty on appeal.

Example

Date	Event
20/01/03	A notice to deliver (Word 29KB) is issued specifying the period 01/01/02 to 31/12/02
23/01/04	COTAX charges and issues the 1s t Flat Rate (F1) penalty automatically. Automatic issue takes place because This AP has a filing date of 31/12/03, that is post June 03 And Its occurrences are created after June 03 The AP is therefore non transitional and subject to automatic processing.
16/04/04	COTAX charges and issues the 2n d Flat Rate (F2) penalty automatically.
01/07/04	18 months after end of AP, COTAX puts the AP ended 31/12/02 on work list DRNR (Determination Required No Return)
07/07/04	Subsequently the Technical Caseworker raises a Revenue Determination using Function RAMA (Record / Amend Assessment)
21/07/04	14 days later COTAX charges the first tax related (TR1) penalty automatically
01/09/04	The Technical Caseworker learns that the company was dormant throughout 2002. He uses Function RAMA to reduce the Revenue Determination to nil And Function MAPD (Maintain AP Dates) to make the whole AP dormant Note: The tax related penalty is automatically reduced to nil when the Revenue Determination is amended, and the F1 and F2 penalties are automatically reduced to nil when the AP is made dormant

If an appeal against the penalties has been received, the Technical Caseworker will be alerted to the need to use Function PPEN to reduce the flat rate penalties to nil, by an entry on work list PENR (Penalties Requiring Review). Although the company was strictly still liable to make a return for the specified period, the Technical Caseworker will normally discharge the penalties on appeal when informed the company was dormant.

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Superseded and superseding APs sharing a common specified period

When you supersede an AP COTAX may have recorded apparent liability to a late filing penalty for the superseded AP, and penalties may already have been determined.

Where penalty determinations have been issued, COTAX will present you with an information screen when you amend the AP record using Function MAPD (Maintain AP Dates).

It also sets the Inhibit Penalty indicator (INH) on any superseding AP with an end date falling into the same specified period as a superseded AP with a charged penalty determination. The purpose of this is to prevent a possibly incorrect double charge to late filing penalties being made, either automatically or as the result of oversight by theTechnical Caseworker.

Example

E Ltd regularly made up its accounts to 31 March and receives a notice to deliver specifying the period 01/04/02 to 31/03/03

Date	Event
31/03/04	Return not delivered
08/04/04	COTAX records the 1s t flat rate (F1) penalty occurrence
22/04/04	COTAX issues the 1s t flat rate (F1) penalty automatically. Automatic issue takes place because This AP has a filing date of 31/03/04, that is post June 03 And Its occurrences are created after June 03 The AP is therefore non transitional and subject to auto processing.
30/04/04	E Ltd sends in a return, accounts and computations for the 11 month period ended 28/02/03, having changed its AP to the last day of February

Result: When the AP record is amended (by LRTN or MAPD), COTAX sets the inhibit signal for the superseding AP to prevent any penalty determination being issued

Subject to any question of a reasonable excuse for the delay, the penalty incurred for the specified period is £100.

The already charged penalty for the superseded AP is regarded as available to cover any penalty due in respect of the superseding AP falling in the same specified period.

Note: 1

When a company fails to deliver its return by the filing date for three or more successive APs requiring returns, it is liable to an increased flat-rate penalty of £500 and £1000. COTAX checks previous live APs to determine whether the increased rate applies. It may not recognise that the increased rate should apply where a previous penalty determination is present on a superseded AP.

In these circumstances you should

• Unset the inhibit signal on the superseding AP

Then

• Reduce the determination on the superseding AP to nil

Then

• Raise a fresh determination on the superseding AP

Every case in which there is a penalty determination on a superseded AP, an entry is created on the PENR work list.

Note: 2 

For AP amendment purposes, COTAX can only

• Relate superseded CT Pay and File APs to superseding CT Pay and File APs

And

• Link (Word 30KB) superseded CTSA APs to superseding CTSA APs

It is not possible to relate or link a CT Pay and File AP with a CTSA AP, or vice versa. For further information see section 'Company Accounting Periods' (COM1000) in the ‘Accounting Periods’ business area.

However, in considering a company’s penalty position, COTAX looks at that company’s specified periods, rather than its APs. This means that for penalty purposes only, COTAX can take action on both CT Pay and File APs and CTSA APs, where they are within the same specified period.

COTAX sets the penalty inhibitor signal on the superseding AP where a penalty originally charged on a CTSA AP, falls due in respect of a CT Pay and File AP in the same specified period.

Note: 3 

Where a penalty determination has not been issued on the supersed AP, COTAX will

• Not allow access to the superseded AP

But

• Automatically deal with penalties arising on the superseding AP

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Superseded and superseding APs not sharing a common specified period

Example

Date	Event
16/03/02	F Ltd incorporated
01/05/02	Form CT41G(New) received advising Business commenced today Company will draw up accounts to 31 December
22/05/02	Date of commencement and accounting date entered on company’s COTAX record
05/02/03	Notice to deliver served specifying the period 01/05/02 to 31/12/02
29/12/03	Company delivers a return for the specified period and it is logged captured and the self assessment recorded
05/01/04	Technical Caseworker examining accounts notices the accounts supplied cover period 01/05/02 to 30/04/03, and that there is no evidence of an AP ending on 31/12/02
07/01/04	Technical Caseworker contacts agent who ‘misunderstood’ the filing requirement and says he will submit a return for the ‘correct period’ (that is 01/05/02 to 30/04/03, being the period of the accounts.) Technical Caseworker unlogs the return

Result:

• If you do not amend the AP record on or before 07/01/04, COTAX will record a flat-rate penalty occurrence of £100 for the notice to deliver that specified the period ended 31/12/02 and automatically issue the penalty determination 14 days later
• If you do amend the AP record on or before 07/01/04, COTAX will calculate that no return was due in response to the notice to deliver that specified the period ended 31/12/02

The filing date for the return for the AP ended 30/04/03 is governed by the date of issue of the notice to deliver in which the AP end date falls, but cannot be before 30/04/04.

For a list of forms relevant to this subject, see COM101081.

For a list of functions to use in particular situations, see COM101031.

For legislation applying to this subject, see COM101011.