Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 55 — Penalty for failure to make returns etc
404

the taxpayer in respect of the tax concerned for the period to which the
return relates.
      (2)
In the case of a penalty which is assessed at a time before P makes the return
to which the penalty relates—
(a)
HMRC is to determine the amount mentioned in sub-paragraph (1)
5
to the best of HMRC’s information and belief, and
(b)
if P subsequently makes a return, the penalty must be re-assessed by
reference to the amount of tax shown to be due and payable in that
return (but subject to any amendments or corrections to the return).
      (3)
In calculating a liability to tax which would have been shown in a return, no
10
account is to be taken of any relief under subsection (4) of section 419 of
ICTA (relief in respect of repayment etc of loan) which is deferred under
subsection (4A) of that section.
Partnerships
25    (1)
This paragraph applies where—
15
(a)
the representative partner, or
(b)
a successor of the representative partner,

fails to make a return falling within item 3 in the Table (partnership returns).
      (2)
A penalty in respect of the failure is payable by every relevant partner.
      (3)
In accordance with sub-paragraph (2), any reference in this Schedule to P is
20
to be read as including a reference to a relevant partner.
      (4)
An appeal under paragraph 20 in connection with a penalty payable by
virtue of this paragraph may be brought only by—
(a)
the representative partner, or
(b)
a successor of the representative partner.
25
      (5)
Where such an appeal is brought in connection with a penalty payable in
respect of a failure, the appeal is to treated as if it were an appeal in
connection with every penalty payable in respect of that failure.
      (6)
In this paragraph—
“relevant partner” means a person who was a partner in the
30
partnership to which the return relates at any time during the period
in respect of which the return was required;
“representative partner” means a person who has been required by a
notice served under or for the purposes of section 12AA(2) or (3) of
TMA 1970 to deliver any return;
35
“successor” has the meaning given by section 12AA(11) of TMA 1970.
Double jeopardy
26
P is not liable to a penalty under any paragraph of this Schedule in respect
of a failure or action in respect of which P has been convicted of an offence.
Interpretation
40
27    (1)
This paragraph applies for the construction of this Schedule.
      (2)
The withholding of information by P is—

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Schedule 56 — Penalty for failure to make payments on time
405

(a)
“deliberate and concealed” if P deliberately withholds the
information and makes arrangements to conceal the fact that the
information has been withheld, and
(b)
“deliberate but not concealed” if P deliberately withholds the
information but does not make arrangements to conceal the fact that
5
the information has been withheld.
      (3)
“HMRC” means Her Majesty’s Revenue and Customs.
      (4)
References to a liability to tax, in relation to a return falling within item 6 in
the Table (construction industry scheme), are to a liability to make payments
in accordance with Chapter 3 of Part 3 of FA 2004.
10
      (5)
References to an assessment to tax, in relation to inheritance tax and stamp
duty reserve tax, are to a determination.
Schedule 56
Section 106

Penalty for failure to make payments on time
Penalty for failure to pay tax
15
1     (1)
A penalty is payable by a person (“P”) where P fails to pay an amount of tax
specified in column 3 of the Table below on or before the date specified in
column 4.
      (2)
Paragraphs 3 to 8 set out—
(a)
the circumstances in which a penalty is payable, and
20
(b)
subject to paragraph 9, the amount of the penalty.
      (3)
If P’s failure falls within more than one provision of this Schedule, P is liable
to a penalty under each of those provisions.
      (4)
In the following provisions of this Schedule, the “penalty date”, in relation
to an amount of tax, means the date on which a penalty is first payable for
25
failing to pay the amount (that is to say, the day after the date specified in or
for the purposes of column 4 of the Table).

Tax to which payment
Amount of tax payable
Date after which penalty is incurred

relates

PRINCIPAL AMOUNTS

30

1
Income tax or capital
Amount payable under section
The date falling 30 days after the date

gains tax
59B(3) or (4) of TMA 1970
specified in section 59B(3) or (4) of

TMA 1970 as the date by which the

amount must be paid

2
Income tax
Amount payable under PAYE
The date determined by or under

35

regulations (except an amount
PAYE regulations as the date by

falling within item 19)
which the amount must be paid

3
Income tax
Amount shown in return under
The date falling 30 days after the date

section 254(1) of FA 2004
specified in section 254(5) of FA 2004

as the date by which the amount must

40

be paid

Finance Bill
Schedule 56 — Penalty for failure to make payments on time
406

Tax to which payment
Amount of tax payable
Date after which penalty is incurred

relates

4
Deductions on
Amount payable under section
The date determined by or under

account of tax under
62 of FA 2004 (except an amount
regulations under section 62 of FA

Chapter 3 of Part 3 of
falling within item 16, 21 or 22)
2004 as the date by which the amount

5

FA 2004 (construction

must be paid

industry scheme)

5
Corporation tax
Amount shown in company tax
The filing date for the company tax

return under paragraph 3 of
return for the accounting period for

Schedule 18 to FA 1998
which the tax is due (see paragraph 14

10

of Schedule 18 to FA 1998)

6
Corporation tax
Amount payable under
The filing date for the company tax

regulations under section 59E of
return for the accounting period for

TMA 1970 (except an amount
which the tax is due (see paragraph 14

falling within item 16, 21 or 22)
of Schedule 18 to FA 1998)

15

7
Inheritance tax
Amount payable under section
The filing date (determined under

226 of IHTA 1984 (except an
section 216 of IHTA 1984) for the

amount falling within item 14 or
account in respect of the liability for

20)
that amount

8
Inheritance tax
Amount payable under section
For the first instalment, the filing date

20

227 or 229 of IHTA 1984 (except
(determined under section 216 of

an amount falling within item 14
IHTA 1984) for the account in respect

or 20)
of the liability for that amount

For any later instalment, the date

falling 30 days after the date

25

determined under section 227 or 229

of IHTA 1984 as the date by which the

instalment must be paid

9
Stamp duty land tax
Amount payable under section
The date falling 30 days after the date

86(1) or (2) of FA 2003
specified in section 86(1) or (2) of FA

30

2003 as the date by which the amount

must be paid

10
Stamp duty reserve
Amount payable under section
The date falling 30 days after the date

tax
87, 93 or 96 of FA 1986 or
determined by or under regulations

Schedule 19 to FA 1999 (except
under section 98 of FA 1986 as the

35

an amount falling within item 16,
date by which the amount must be

21 or 22)
paid

11
Petroleum revenue
Amount payable under
The date falling 30 days after the date

tax
paragraph 13 of Schedule 2 to
determined in accordance with

OTA 1975 (except an amount
paragraph 13 of Schedule 2 to OTA

40

falling within item 16, 21 or 22)
1975 as the date by which the amount

must be paid

AMOUNTS PAYABLE IN DEFAULT OF A RETURN BEING MADE

12
Income tax or capital
Amount payable under section
The date falling 30 days after the date

gains tax
59B(5A) of TMA 1970
specified in section 59B(5A) of TMA

45

1970 as the date by which the amount

must be paid

13
Corporation tax
Amount shown in determination
The filing date for the company tax

under paragraph 36 or 37 of
return for the accounting period for

Schedule 18 to FA 1998
which the tax is due (see paragraph 14

50

of Schedule 18 to FA 1998)

14
Inheritance tax
Amount shown in a
The filing date (determined under

determination made by HMRC in
section 216 of IHTA 1984) for the

the circumstances set out in
account in respect of the liability for

paragraph 2
that amount

55

Finance Bill
Schedule 56 — Penalty for failure to make payments on time
407

Tax to which payment
Amount of tax payable
Date after which penalty is incurred

relates

15
Stamp duty land tax
Amount shown in determination
The date falling 30 days after the filing

under paragraph 25 of Schedule
date for the return in question

10 to FA 2003 (including that

5

paragraph as applied by section

81(3) of that Act)

16
Tax falling within
Amount (not falling within any
The date falling 30 days after the date

any of items 1 to 6 or
of items 12 to 15) which is shown
by which the amount would have

9 to 11
in an assessment or
been required to be paid if it had been

10

determination made by HMRC in
shown in the return in question

the circumstances set out in

paragraph 2

AMOUNTS SHOWN TO BE DUE IN OTHER ASSESSMENTS, DETERMINATIONS, ETC

17
Income tax or capital
Amount payable under section
The date falling 30 days after the date

15

gains tax
55 of TMA 1970
determined in accordance with

section 55(3), (4), (6) or (9) of TMA

1970 as the date by which the amount

must be paid

18
Income tax or capital
Amount payable under section
The date falling 30 days after the date

20

gains tax
59B(5) or (6) of TMA 1970
specified in section 59B(5) or (6) of

TMA 1970 as the date by which the

amount must be paid

19
Income tax
Amount shown in determination
The date determined by or under

made by HMRC where it appears
PAYE regulations as the date by

25

that tax payable under PAYE
which the amount must be paid

regulations has not been paid

20
Inheritance tax
Amount shown in—
The later of—

(a)
an amendment or
(a)
the filing date (determined

correction of a return
under section 216 of IHTA

30

showing an amount
1984) for the account in

falling within item 7 or
respect of the liability for

8, or
that amount, and

(b)
a determination made
(b)
the date falling 30 days after

by HMRC in
the date on which the

35

circumstances other
amendment, correction,

than those set out in
assessment or determination

paragraph 2
is made

21
Tax falling within
Amount (not falling within any
The date falling 30 days after—

any of items 1 to 6 or
of items 17 to 19) shown in an
(a)
the date by which the

40

9 to 11
amendment or correction of a
amount must be paid, or

return showing an amount
(b)
the date on which the

falling within any of items 1 to 6
amendment or correction is

or 9 to 11
made,

whichever is later

45

22
Tax falling within
Amount (not falling within any
The date falling 30 days after—

any of items 1 to 6 or
of items 17 to 19) shown in an
(a)
the date by which the

9 to 11
assessment or determination
amount must be paid, or

made by HMRC in circumstances
(b)
the date on which the

other than those set out in
assessment or determin-

50

paragraph 2
ation is made,

whichever is later

Assessments and determinations in default of return
2
The circumstances referred to in items 14, 16, 20 and 22 are where—
(a)
P or another person is required to make or deliver a return falling
55
within any item in the Table in Schedule 55,

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Schedule 56 — Penalty for failure to make payments on time
408

(b)
that person fails to make or deliver the return on or before by the date
by which it is required to be made or delivered, and
(c)
if the return had been made or delivered as required, the return
would have shown that an amount falling within any of items 1 to 11
was due and payable.
5
Amount of penalty: occasional amounts and amounts in respect of periods of 6 months or more
3     (1)
This paragraph applies in the case of—
(a)
a payment of tax falling within any of items 1, 3 and 7 to 22 in the
Table,
(b)
a payment of tax falling within item 2 or 4 which relates to a period
10
of 6 months or more, and
(c)
a payment of tax falling within item 2 which is payable under
regulations under section 688A of ITEPA 2003 (recovery from other
persons of amounts due from managed service companies).
      (2)
P is liable to a penalty of 5% of the unpaid tax.
15
      (3)
If any amount of the tax is unpaid after the end of the period of 5 months
beginning with the penalty date, P is liable to a penalty of 5% of that amount.
      (4)
If any amount of the tax is unpaid after the end of the period of 11 months
beginning with the penalty date, P is liable to a penalty of 5% of that amount.
4     (1)
This paragraph applies in the case of a payment of tax falling within item 5
20
or 6 in the Table.
      (2)
P is liable to a penalty of 5% of the unpaid tax.
      (3)
If any amount of the tax is unpaid after the end of the period of 3 months
beginning with the penalty date, P is liable to a penalty of 5% of that amount.
      (4)
If any amount of the tax is unpaid after the end of the period of 9 months
25
beginning with the penalty date, P is liable to a penalty of 5% of that amount.
Amount of penalty: PAYE and CIS amounts
5     (1)
Paragraphs 6 to 8 apply in the case of a payment of tax falling within item 2
or 4 in the Table.
      (2)
But those paragraphs do not apply in the case of a payment mentioned in
30
paragraph 3(1)(b).
6     (1)
P is liable to a penalty under this paragraph of an amount determined by
reference to the number of defaults in relation to the same tax that P has
made during the tax year.
      (2)
P makes a default in relation to a tax when P fails to pay an amount of that
35
tax in full on or before the date on which it becomes due and payable.
      (3)
But the first failure during a tax year to pay an amount of tax does not count
as a default in relation to that tax during that tax year.
      (4)
If P makes 1, 2 or 3 defaults during the tax year, P is liable to penalty of 1%
of the total amount of those defaults.
40
      (5)
If P makes 4, 5 or 6 defaults during the tax year, P is liable to penalty of 2%
of the total amount of those defaults.

Finance Bill
Schedule 56 — Penalty for failure to make payments on time
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      (6)
If P makes 7, 8 or 9 defaults during the tax year, P is liable to penalty of 3%
of the total amount of those defaults.
      (7)
If P makes 10 or more defaults during the tax year, P is liable to penalty of
4% of the total amount of those defaults.
      (8)
In this paragraph—
5
(a)
in accordance with sub-paragraph (1), the references in sub-
paragraphs (4) to (7) to a default are references to a default in relation
to the tax mentioned in sub-paragraph (3),
(b)
the amount of a default is the amount which P fails to pay, and
(c)
a default counts for the purposes of sub-paragraphs (4) to (7) even if
10
the default is remedied before the end of the tax year.
7
If any amount of the tax is unpaid after the end of the period of 6 months
beginning with the penalty date, P is liable to a penalty of 5% of that amount.
8
If any amount of the tax is unpaid after the end of the period of 12 months
beginning with the penalty date, P is liable to a penalty of 5% of that amount.
15
Special reduction
9     (1)
If HMRC think it right because of special circumstances, they may reduce a
penalty under any paragraph of this Schedule.
      (2)
In sub-paragraph (1) “special circumstances” does not include—
(a)
ability to pay, or
20
(b)
the fact that a potential loss of revenue from one taxpayer is balanced
by a potential over-payment by another.
      (3)
In sub-paragraph (1) the reference to reducing a penalty includes a reference
to—
(a)
staying a penalty, and
25
(b)
agreeing a compromise in relation to proceedings for a penalty.
Suspension of penalty during currency of agreement for deferred payment
10    (1)
This paragraph applies if—
(a)
P fails to pay an amount of tax when it becomes due and payable,
(b)
before the date on which P becomes liable to any penalty for that
30
failure, P makes a request to HMRC that payment of the amount of
tax be deferred, and
(c)
whether before or after that date, HMRC agrees that payment of that
amount may be deferred for a period (“the deferral period”).
      (2)
If P would (apart from this sub-paragraph) become liable, during the
35
deferral period, to a penalty under any paragraph of this Schedule for failing
to pay that amount, P is not liable to that penalty.
      (3)
But if—
(a)
P breaks the agreement (see sub-paragraph (4)), and
(b)
HMRC serves on P a notice specifying any penalty to which P would
40
become liable apart from sub-paragraph (2),

P becomes liable, at the date of the notice, to that penalty.
      (4)
P breaks an agreement if—

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Schedule 56 — Penalty for failure to make payments on time
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(a)
P fails to pay the amount of tax in question when the deferral period
ends, or
(b)
the deferral is subject to P complying with a condition (including a
condition that part of the amount be paid during the deferral period)
and P fails to comply with it.
5
      (5)
If the agreement mentioned in sub-paragraph (1)(c) is varied at any time by
a further agreement between P and HMRC, this paragraph applies from that
time to the agreement as varied.
Assessment
11    (1)
Where P is liable for a penalty under any paragraph of this Schedule HMRC
10
must—
(a)
assess the penalty,
(b)
notify P, and
(c)
state in the notice the period in respect of which the penalty is
assessed.
15
      (2)
A penalty under any paragraph of this Schedule must be paid before the end
of the period of 30 days beginning with the day on which notice of the
assessment of the penalty is issued.
      (3)
An assessment of a penalty under any paragraph of this Schedule—
(a)
is to be treated for procedural purposes in the same way as an
20
assessment to tax (except in respect of a matter expressly provided
for by this Schedule),
(b)
may be enforced as if it were an assessment to tax, and
(c)
may be combined with an assessment to tax.
      (4)
A supplementary assessment may be made in respect of a penalty if an
25
earlier assessment operated by reference to an underestimate of an amount
of unpaid tax.
      (5)
A supplementary assessment may be made in respect of a penalty under
paragraph 6 if—
(a)
notice of the assessment of the penalty was issued before the end of
30
the tax year, and
(b)
before the end of the year, P makes a further default (so that the
penalty for the earlier default is increased).
12    (1)
An assessment of a penalty under any paragraph of this Schedule in respect
of any amount must be made on or before the later of date A and date B.
35
      (2)
Date A is the last day of the period of 2 years beginning with the date
specified in or for the purposes of column 4 of the Table (that is to say, the
last date on which payment may be made without incurring a penalty).
      (3)
Date B is the last day of the period of 12 months beginning with—
(a)
the end of the appeal period for the assessment of the amount of tax
40
in respect of which the penalty is assessed, or
(b)
if there is no such assessment, the date on which that amount of tax
is ascertained.
      (4)
In sub-paragraph (3)(a) “appeal period” means the period during which—
(a)
an appeal could be brought, or
45