SDLTM86370 - Compliance: Penalties

Time limits

All penalty action is subject to time limits. If the relevant time limit has expired then the compliance caseworker cannot

• proceed for a penalty before a Tax Tribunal
• determine a penalty formally
• include a penalty in a negotiated contract settlement other than by way of voluntary restitution

For these reasons a compliance caseworker must

• avoid the premature issue of a closure notice, or premature determination of an appeal against a discovery assessment or against an amendment to a land transaction return
• settle the case as quickly as possible by reviewing for formal penalty action once the closure notice has been issued and/or any appeals against discovery assessments or self-assessment amendments have been determined

For tax-related penalties FA03/SCH14/PARA8 states that the time limit for penalty proceedings or determination is within

• 6 years after the date on which the penalty was incurred or, in the case of a daily penalty, began to be incurred
• if later, 3 years after the tax on which it is based was finally determined

For non tax-geared penalties the time limit is within 6 years after the date on which the penalty was incurred or, in the case of a daily penalty, began to be incurred.

Deceased persons

The guidance that follows may be affected by court decisions on the effect of Article 6 of the Human Rights Act 1998. See SDLTM80700+.

In the case of a deceased person, where the penalty determination is made on the personal representatives, (rather than on the deceased whilst still alive), the 3-year rule at FA03/SCH14/PARA8 only applies to assessments made within the 6-year period commencing with the effective date of the transaction.

FA03/SCH14/PARA4 allows penalties to be imposed on the personal representatives of a deceased person and they become a debt due from and payable out of the estate.

Although FA03/SCH10/PARA31(4) limits the making of assessments etc on the personal representatives of a deceased person to the 3-year period after their death, there is no similar limitation to penalty action.

Penalty for assisting in preparation of incorrect return FA03/S96

The time limit for a penalty under this clause is now 20 years from the date when the penalty was incurred. See SDLTM86360.