Chapter 7 CTSA Penalty regime Flashcards
7.2 Penalties for failure to notify chargeability
Issue of a tax return – if a company does not inform HMRC of chargeability, they can receive a penalty based on the behaviour of the company as a percentage of the potential lost revenue.
Behaviour Max pen Min pen unpromoted disclosure Min pen prompted disclosure
Deliberate and concealed 100% 30% 50%
Deliberate but not concealed 70% 20% 35%
Any other case 30% Less than 12 months, 0%
More than 12 months 10% Less than 12 months, 10%
More than 12 months, 20%
7.3 Penalties for late returns
A flat rate penalty of £100 is levied automatically for a late return. This increases to £200 where the return is more than 3 months late. These penalties are increased to £500 and £1,000 for a company’s third consecutive offence.
A tax geared penalty of 10% applies if a return is not filed 18 months after the end of the accounting period. This is 10% of the corporation tax unpaid. This doubles to 20% if the return is not filed within 2 years of the end of the accounting period, the penalty is only based on the tax unpaid in the 18-month period.
Exceptions – where penalty for a late return is calculated based on the tax liability, the amount of penalty is reduced by any other penalty calculated in relation to the same liability. However the penalty is not reduced for late payment of tax. Late filing penalties must be paid within 30 days or interest is charged. The penalty can be appealed by the company. Penalties do not apply if the company has a reasonable excuse, this is not defined by legislation.
7.4 Penalty for failing to keep records
The penalty for failing to keep records is £3,000 per accounting period.
7.5 Penalties for failing to produce documents
If a company obstructs HMRC, it is liable to a £300 penalty, if a company continues to do this, then a penalty of up to £60 can be charged per day. If this continues for 30 days the daily penalty can be increased on application to the tribunal to an amount not exceeding £1,000 per day.
If a company has been subject to the £300 penalty and HMRC believe they has underpaid a significant amount of tax, the upper tribunal can impose a tax related penalty. If a company still provides inaccurate information, it is liable to a £3,000 penalty.
All penalties must be paid within 30 days or interest is charged and penalties do not apply if the company has a reasonable excuse.
7.6 Penalties for incorrect returns
Behaviour Max pen Minimum pen unprompted disclosure Min pen prompted disclosure
Deliberate and concealed 100% 30% 50%
Deliberate not concealed 70% 20% 35%
careless 30% 0% 15%
The potential lost revenue is generally the extra tax due as a result of the correction of the error.
A penalty for careless errors can be suspended for 2 years provided the suspension conditions are kept and no further penalties incur in the suspension period. If the conditions are met in the period, the penalty is cancelled.
7.8 Penalties for late payment of QIPs
A penalty is charged for up to twice the amount of interest chargeable on late paid instalment payments if HMRC can prove the company acted deliberately or recklessly in not paying the right amount of tax. The penalties are due after the filing date of the CT600.
Companies unable to tax at the due date can make a time to pay arrangement with HMRC, with defers the payment. Late payment penalties must be paid within 30 days of the date of notice or interest is charged.
