New penalty regime from HMRC

HM Revenue & Customs (“HMRC”) intends to implement the new late filing/payment penalties and interest provisions later this year.  HMRC expects that new SA penalties for sending in late tax returns will be introduced from October 2011 so that they will apply to late returns for 2010/2011 and subsequent tax years.  The new penalties for late payment  are expected to apply to late balancing payments from 2012.

Late tax returns

HMRC will still charge a penalty of £100 if a return is late and we may still appeal against the penalty if we have a reasonable excuse.

At the moment the amount of this penalty is ‘capped’ so the penalty can’t be more than the amount of tax unpaid at 31 January. This capping applies to tax returns for individuals, trust and registered pension schemes tax returns. It doesn’t apply to late partnership tax returns.

When the new penalties are introduced, no penalties will be capped so the full penalty of £100 will always be due if a tax return is late.  If the 2010/2011 tax return is excessively late, the following penalties can also be charged:

  • Over three months late – a daily penalty of £10 per day for the next 90 days 
  • Over six months late – an additional £300 or five per cent of the tax due if this is higher
  • Over twelve months late – a further £300 or a further five per cent of the tax due if this is higher

Late payment

The first two late payment penalties will be similar to existing penalties, so from January 2012 HMRC will charge the following penalties if tax is paid late:

  • a 5 per cent penalty on tax unpaid on 31 January, if still unpaid 30 days later
  • a second 5 per cent penalty, on tax unpaid on 31 January, if still unpaid six months later

In addition there will be a third 5 per cent penalty, if you haven’t paid tax due on 31 January twelve months later. This will apply from January 2012.

The above penalties are in addition to charging interest from the date the tax was due until payment is received.