What penalties apply if tax is paid late? What are late payment penalties? Can you appeal late payment penalties?

If tax is paid late, HMRC can charge a penalty for failure to make payments on time.

At a glance

Late payment penalties under schedule 56 FA 2009 apply in respect of the following taxes:

  • Pay as you earn (PAYE)
  • National Insurance (NICS)
  • Constribution industry scheme (CIS)
  • Income tax (IT)
  • Capital gains tax (CGT)
  • Annual Tax on Enveloped Dwellings (ATED)
  • Diverted Profits Tax (DPT)
  • Accelerated Payments


Penalties are set as follows:

Late payment Penalty
30 days late 5% of tax due
6 months late 5% of tax outstanding at that date
12 months late 5% of tax outstanding at that date

 

Time to pay agreements

  • If the taxpayer makes a time to pay agreement with HMRC the penalty is suspended.
  • The taxpayer will become liable to the penalty if the agreement is broken.

 Special reduction

  • HMRC has a statutory requirement to consider whether any special circumstances exist and if so it may override the statutory penalties and reduce them as it sees fit. 
  • If HMRC fails to consider special circumstances then its decision is "flawed".
  • If there is no evidence of HMRC considering any special circumstances a taxpayer may also appeal against the penalties on the basis that its decision to charge penalties is flawed. 
  • A tribunal may then consider whether to reduce the penalties. However it can only make a reduction where special circumstances exist.
  • "Special circumstances" mean uncommon, exceptional, abnormal or unusual circumtances.

 Appeal 

Sch 56 FA 2009 provides for the appeal process and it is advisable first off to ensure that any penalty charged has been made correctly according to the legislation.

  • The taxpayer has 30 days to lodge an appeal with HMRC against a tax penalty.
  • A late appeal may be accepted at the discretion of HMRC or the tribunal judge.

See: How to appeal a tax penalty and Appeals: Grounds for appeal toolkit for detailed guidance and hints and tips.

What's New?

Covid-19 measures: see COVID-19 Tracker

Other changes in 2020/21 and earlier: see Late Filing Penalties: Subscriber guide

Small Print

Small print

Schedule 56 FA 2009

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