COM101140 - Penalties: penalty determinations: superseded accounting periods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Superseded and superseding APs sharing a common specified period
Superseded and superseding APs not sharing a common specified period 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It is important to note that COTAX handles penalties on superseded APs in a different way to tax, as the penalty relates to the specified period (Word 23kb), not the AP.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 23.5kb) 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
20/01/11 A notice to deliver (Word 24.5kb) is issued specifying the period 01/01/10 to 31/12/10
16/01/12 COTAX charges and issues the first Flat-rate (F1) penalty automatically.
16/04/12 COTAX charges and issues the second Flat-rate (F2) penalty automatically.
01/07/12 18 months after AP ended 31/12/10 COTAX puts it on work list DRNR (Determination Required No Return)
07/07/12 Subsequently the Technical Caseworker raises a Revenue Determination using Function RAMA (Record / Amend Assessment)
21/07/12 14 days later COTAX charges the first tax related (TR1) penalty automatically
01/09/12 The company tells us it was dormant throughout 2010.He uses
  • Function RAMA to reduce the Revenue Determination to nil

And

  • Function MAPD (Maintain AP Dates) to make the 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 an AP is superseded, COTAX may have recorded apparent liability to a late filing penalty for the superseded AP and penalties may already have been determined.

Note: COTAX cannot automatically handle the penalty implications of superseded and superseding APs. If an AP is superseded and a penalty determination has been made on the superseded AP COTAX will list the case for manual review on

  • EFRL, if the AP structure is superseded as a result of online filing
  • PENR, if the AP structure is changed manually with LRTN or MAPD

Where penalty determinations have been issued, COTAX will set 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.

Example

E Ltd regularly made up its accounts to 31 March and receives a notice to deliver specifying the period 01/04/10 to 31/03/11


Date Event
31/03/12 Return not delivered
01/04/12 COTAX records the first flat rate (F1) penalty occurrence
16/04/12 COTAX issues the first flat rate (F1) penalty automatically.
30/04/12 E Ltd files a return, accounts and computations online for the 11 month period ended 28/02/11, having changed its AP to the last day of February

COTAX sets the inhibit signal for the superseding AP to prevent any penalty determination being issued and lists the case on EFRL with a reason of ‘AP changed’.

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 superseded AP to nil

Then

  • Raise a fresh determination on the superseding AP using PPEN

Note: 2 

Where a penalty determination has not been issued on the superseded 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
16/03/11 F Ltd incorporated
01/05/11 Form CT41G received advising
  • Business commenced 16/03/11
  • Company will draw up accounts to 31/12/11
22/05/11 Date of commencement and future accounting date entered on company’s COTAX record
20/01/12 Notice to deliver served specifying the period 16/03/11 to 31/12/11
31/12/12 Filing date for AP ended 31/12/11
16/01/13 COTAX issues first flat-rate penalty as no return received for AP ended 31/12/11
21/01/13 Notice to deliver served specifying the period 01/01/12 to 31/12/12
12/02/13 Company appeals penalty determination for the period 16/03/11 to 31/12/11 on the grounds that it was not required to deliver any return for the period specified in the Notice
  Contrary to the CT41G, the company draws up its first accounts for the period 16/03/11 to 31/03/2012 - to “the last day of the month in which the anniversary of its incorporation falls” under the normal Companies Act rule. (See section 391(2)(b)(ii) CA 2006)
05/04/13 Company changes its APs online and delivers two returns for the periods 16/03/11 to 15/03/12 and 16/03/12 to 31/03/12 which are logged, captured and the self assessment recorded automatically.
06/04/13 The case appears on EFRL with a reason of ‘AP changed’
22/04/13 COTAX issues first flat-rate penalty for APs ended 15/03/12 and 31/03/12 as both were received after their common filing date of 31/03/13. (See para 14(1)(b) Sch 18 FA 1998)

COTAX does not set the Inhibit Penalty indicator (INH) on either superseding AP as neither share a common specified period with the superseded AP which has a charged penalty determination. COTAX therefore penalises the company for its

  • Failure to file returns for APs 16/03/11 to 15/03/12 and 16/03/12 to 31/03/12 by the filing date, and
  • Apparent failure to file a return for specified period 16/03/11 to 31/12/11

As there was no AP ending in or at the end of the specified period 16/03/11 to 31/12/11 no return is due and you should use PPEN to reduce the penalty determination on the superseded AP to nil.

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.

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