EM4660 - Penalties: Claims to Reduce Payments on Account
TMA70/S59A(6)
Payments on account under TMA70/S59A for any tax year are due on
31 January of that tax year and 31 July next following that tax
year, subject to de minimus limits and are calculated by reference
to the tax liability for the preceding year
Where a taxpayer’s circumstances change significantly
fro one year to the next, they can make a claim to reduce or cancel
the payments on account
The revised payments should reflect the taxpayer’s
views on what payment on account, if any, are due for the current
year
A penalty can be charged where a taxpayer, fraudulently or
negligently
EM5125, makes an incorrect statement in
connection with such a claim
Where your enquiries show the claim to be excessive you
should consider, in appropriate cases, whether penalties may be
due. Appropriate cases are those where
- the false claim was particularly blatant, for example, there were no facts at all that could reasonably have led the taxpayer to believe that a reduced payment was due, or
- the taxpayer has systematically and regularly made unjustified claims to reduce payments and
- the reduction was large both in absolute terms and in relation to the true liability.
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The maximum amount of the penalty is the difference between
- the amount that would have been paid but for the incorrect statement and
- the amount of the payments on account actually made.
That penalty is subject to abatement by HMRC and can be amended
or cancelled as a result of an appeal to the Commissioners.
The intention of the penalty is to prevent gross or
persistent abuse. If the taxpayer makes an accurate self
assessment, no actual tax loss will result from the claim to reduce
payments on account. Payment of tax properly due will simply have
been deferred, and interest will be payable on the deferred tax. In
practice it will be difficult to charge a penalty in these cases
because we will not be able to demonstrate the taxpayer acted
negligently. DARM officers will therefore not generally review
cases for potential penalties under Section 59A(6) merely because
the payments on account were less than they might have been.
