COM101050 - Penalties: penalty determinations: making penalty determinations

This subject is presented as follows

General
Flat-rate penalty
Tax-related penalty
Multiple tax-related penalties
Further determinations 

General

You can use Function PPEN (Prepare Penalty Determination) to make and amend penalty determinations.

The function bases its calculations on the specified period (Word 23kb), which is not necessarily an AP, and the screens show

• The penalty or penalties apparently incurred for each AP for which a return is required by a particular notice to deliver (Word 24.5kb) 
• Any penalties charged so far

In recording and displaying penalty information, COTAX treats the penalty legislation as imposing four different penalties rather than two

• F1 is a flat-rate (Word 28kb) penalty at the lower rate
• F2 is a flat-rate penalty at the higher rate
• TR1 is a tax-related (Word 26kb) penalty at the lower rate
• TR2 is a tax-related penalty at the higher rate

When a company is liable to an increased level of flat-rate penalty, COTAX will automatically calculate and display the increased figures of

• £500 (for F1)
• £1000 (for F2)

Note: Before 1 April 2011, COTAX processing included a concessionary extension to the filing period under Extra Statutory Concession ESC / B45 and ESC / B46 (Word 24.5kb). COTAX did not record liability to a penalty until after that period has expired. The concession ended on 31 March 2011 with the introduction of mandatory online filing of company tax returns.

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Flat-rate penalty

The amount of a flat-rate penalty liability that COTAX records will be correct if the underlying information is correct. You cannot use Function PPEN to change the amount that COTAX has recorded.

You can only choose to charge the penalty or not.

If the function is showing a liability that you think is incorrect, check

• The recording of any necessary revised or deferred filing dates. For more information see business area ’Accounting Periods’
• Whether any existing penalties relate to a superseded AP. For more information see subject 'Superseded Accounting Periods' (COM101140)

Once you have used Function PPEN to make a determination you cannot change it or prevent it being issued. If it is incorrect, you must make an amended determination, also using Function PPEN, after the issue of the determination.

If necessary, you can suppress the computer issued penalty output but you should only do so in exceptional circumstances, for example, when amending a penalty to nil that was issued to a struck off company. (See subject ‘Companies Requiring Special Consideration’ (COM100020) in this business area)..

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Tax-related penalty

COTAX operates in the same way for tax-related penalties as it does for flat-rate penalties, but you can amend the figure of tax unpaid (Word 37kb) used to calculate the penalty. This may be necessary, for example, when

• A company claims to have made a further payment before the 18 month point

• There is an amendment to the tax charge

Amending ‘unpaid tax’

If you need to amend the figure of unpaid tax

• Use Function PPEN and select the [AP Details] button on screen COT130D
• Enter your figure of tax paid at the 18 month point in the Tax Paid at TR1 Date (Inspector) field on screen COT130K and select the [OK] button

COTAX will then use that figure to recalculate the ‘unpaid tax’ and revise and issue the tax-related penalty position automatically unless you use have used PPEN to do it manually.

Note: If exceptionally for a CTSA AP, 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. See subject 'Interaction Of Flat-Rate And Tax-Related Penalties' (COM100070) in this business area.

Once you have used Function PPEN to make a determination you cannot change it or prevent it being issued. If it is incorrect, you must make an amended determination, also using Function PPEN, after the issue of the determination. As with flat-rate penalties, you can suppress the computer issued penalty output if necessary in exceptional circumstances.

Note: COTAX does not recognise that a tax-related penalty has been incurred when the return has not been delivered within 18 months after the end of the AP, if

• You reissued the notice to deliver

• The tax-related penalty is incurred earlier than the higher (£200) flat-rate penalty. For more information see section 'Late Delivery Of Returns' in this business area

The company is liable to both a £100 flat-rate, and a 10% tax-related penalty, but COTAX does not identify the tax-related penalty until either

• The higher flat-rate penalty is incurred

• The return is received

Automatic penalty processing will take place as appropriate.

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Multiple tax-related penalties

Companies may be liable to two or more tax-related penalties on the same amount of CT. For example, a penalty could arise under

• Paras 18(2) and 20 Schedule 18 FA 1998 for a CTSA return period

• Sections 94(6) and 96 TMA 1970 for a CT Pay and File return period

For CTSA return periods, Para 90 Schedule 18 FA 1998 (S97A TMA 1970 for CT Pay and File return periods) prevents a double penalty charge on the same amount of tax by limiting the total amount of tax-related penalty chargeable to the greater of them.

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Further determinations

You can make a further determination of a penalty if you discover that the penalty in the original notice is, or has become, insufficient. S100(5) TMA 1970 provides the authority in such cases.

Where the amount of unpaid tax changes, whether or not the determination is under appeal, COTAX automatically issues an amended determination, unless you have already used Function PPEN to do it manually.

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

For legislation applying to this subject, see COM101011.