Chapter 7: CTSA penalty regime Flashcards
7.2 Penalties for failure to notify chargeability
A company must give written notice to HMRC within three months of its first accounting period of their chargeability to tax.
Where a CT603 is not issued a company is required to notify HMRC that they have taxable profits for an accounting period. Notification of chargeability must be made within 12 months of the end of the accounting period. the penalty is based on the behaviour of the company and the potential lost revenue. The maximum and minimum penalties are below:
Behaviour Max pen Min pen with unprompted disclosure Min pen with promoted disclosure
Deliberate and concealed 100% 30% 50%
Deliberate and not concealed 70% 20% 35%
Any other case 30% 0% within a year
10% after a year 10% within a year
20% after a year
7.3 Penalties for late returns
Flat rate – a flat rate penalty of £100 is given when the return is up to 3 months late and another £100 where the return is more than 3 months late. The penalties are increased to £500 and £1,000 for a company’s third consecutive offence.
Tax geared penalty – a penalty of 10% applies is a return is not filed within 18 months of the end of the accounting period, this doubles to 20% if the return is not filed within 2 years of the end of the accounting period
Exceptions – where a penalty for a late return is calculated based on the tax liability the amount of penalty is reduced by any other penalty in relation to the same liability. Late filing penalties must be paid within 30 days or interest is charged. Penalties can be appealed by a company and will not be charged if the company has a reasonable excuse, this is not defined in legislation and each claim is considered on a case-by-case basis.
7.4 Penalty for failing to keep records
Companies normally should keep records for at least six years from the end of the accounting period. Failure to do so is a penalty of £3,000 per accounting period.
7.5 Penalties for incorrect returns – introduction
Penalties apply where a return contains an inaccuracy which leads to an understatement of tax, inflated statement of loss or a false claim to a tax repayment. Penalties are charged for each error. The penalty is the lost potential revenue times a percentage, the maximum and minimum percentages are:
Behaviour Max pen Min pen with unprompted disclosure Min pen with promoted disclosure
Deliberate and concealed 100% 30% 50%
Deliberate and not concealed 70% 20% 35%
Any other case 30% 0%
15%
7.6 Penalties for incorrect returns – other points
If a penalty is charged for a carless error, it may be suspended for two years provided the conditions are agreed with HMRC and not further penalties are incurred in the suspension period. If conditions are met the penalty is cancelled. A penalty of an inaccuracy must be paid within 30 days of the date of the notice issuing the penalty, or interest is charged.
7.7 Penalties for late payment of quarterly instalments
Late payment of corporation tax is only subject to interest. Companies unable to make payments of tax by the due date may ask HMRC that payment is deferred for a period, this s a time to pay arrangement.
Late payment penalties must be paid within 30 days or interest is charged. The decision to issue a penalty or the amount of the penalty can be appealed by a company. HMRC have the power to reduce penalties if there are special circumstances.
