COM100110 - Penalties: late delivery of returns: tax-related penalties

This subject is presented as follows

General

If a company fails to deliver its return within 18 months after the end of the AP it is potentially liable to a penalty under

• Para 18 Schedule 18 FA 1998 for CTSA return periods

• S94(6) TMA 1970 for CT Pay and File return periods

The penalties chargeable are

• For CTSA return periods
• 10% of the tax unpaid at the 18 month point (or, if later, the filing date (Word 42KB)), if the company delivers its return within two years of the end of the AP
• 20% of the tax unpaid at the 18 month point (or, if later, the filing date), if the company delivers its return later than two years after the end of the AP
• For CT Pay and File return periods
• 10% of the tax unpaid at that 18 month point, if the company delivers its return within two years of the end of the AP
• 20% of the tax unpaid at that 18 month point, if the company delivers its return later than two years after the end of the AP

Note: The filing date may exceptionally fall after the 18 month point when

• Notice to Deliver is issued late

• There is a short AP at the beginning of a long period of account

In such cases the company will incur no tax-related penalty providing it delivers its return by the filing date.

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Tax Unpaid

For these purposes tax unpaid is defined differently for CTSA return periods and CT Pay and File return periods.

CTSA return period

Para 18(3) Schedule 18 FA 1998 defines ‘Tax Unpaid’ as

• The amount of tax payable by the company for the AP for which the return was required
• Remaining unpaid on the date when the liability to the penalty arises under Para 18(1) Schedule 18 FA 1998

Note: Exceptionally, for CTSA return periods only, if the filing date for the return is more than 18 months after the end of the AP, then the penalty is based upon the tax unpaid at that later date. No such extension applies to CT Pay and File return periods

In arriving at the amount of tax payable, you do not allow any deferred relief due under the provisions of S458 CTA 2010 (formerly S419(4A) ICTA 1988) (relief in respect of repayment of loan). Para 18(4) Schedule 18 FA 1998 refers.

CT Pay and File return period

S94(7) TMA 1970 defines ‘Tax Unpaid’ as

• The CT chargeable on the profits of the return period (Word 28KB) that remains unpaid 18 months after the end of the return period

• Any Income Tax that is to be set-off under S7(2) or 11(3) ICTA 1988

In this context ‘CT Chargeable’ means the final figure, after deduction of group relief and carry-backs of trade losses, surplus ACT and so on, from later APs.

The sole exception to this rule is in S94(8) TMA 1970, namely

• You do not deduct ACT carried back from a subsequent AP that ends more than two years after the end of the AP for which the penalty is due

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S102 FA 1989 surrenders

S102 FA 1989 allows the surrender of a tax refund from one group company to another. For more information see business area ‘Repayts / Reallocs’.

To calculate ‘Tax Unpaid’ for the purpose of a tax-related penalty, the recipient company is treated

• As having paid the amount of the refund on the day the two companies jointly gave notice to the Technical Caseworker under S102 FA 1989

• As having paid the tax on the date when the tax was paid by the surrendering company (S102(6) FA 1989)

Note: If the notice of surrender is given after the 18 month point tax-related penalties must be based on

• The tax unpaid on the date when the liability to the penalty arises for a CTSA return period
• The tax unpaid at the 18 month point for a CT Pay and File return period

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Amendment to CT chargeable

The final CT charge may not have been established for the AP when the tax-related penalty is charged. If the amount of the CT charge on which a tax-related penalty has been based is subsequently amended, COTAX automatically recalculates and issues an amended determination.

For more information see

• Sections ‘Penalty Determinations’ and ‘Penalty Work Lists’ in this business area
• Business area ‘Work Lists’

Example 1 (Word 40KB) illustrates the calculation of tax-related penalties and the application of the rules to determine the amount of ‘Tax Unpaid’, for a CT Pay and File return period.

For legislation applying to this subject, see COM100013.