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Finance Act 2009

Type Public General Act

Publication 2009-07-21

Last updated 2025-09-01

State In force

Department Statute Law Database

Source legislation.gov.uk

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SCHEDULE 1AB (1) (1) This paragraph applies where— (a) a person has paid an amount by way of income tax or capital gains tax but the person believes that the tax was not due, or (b) a person has been assessed as liable to pay an amount by way of income tax or capital gains tax, or there has been a determination or direction to that effect, but the person believes that the tax is not due. (2) The person may make a claim to the Commissioners for repayment or discharge of the amount. (3) Paragraph 2 makes provision about cases in which the Commissioners are not liable to give effect to a claim under this Schedule. (4) Paragraphs 3 to 7 (and sections 42 to 43C and Schedule 1A) make further provision about making and giving effect to claims under this Schedule. (5) Paragraph 8 makes provision about the application of this Schedule to amounts paid under contract settlements. (6) The Commissioners are not liable to give relief in respect of a case described in sub-paragraph (1)(a) or (b) except as provided— (a) by this Schedule and Schedule 1A (following a claim under this paragraph), or (b) by or under another provision of the Income Tax Acts or an enactment relating to the taxation of capital gains. (7) For the purposes of this Schedule an amount paid by one person on behalf of another is treated as paid by the other person. (2) (1) The Commissioners are not liable to give effect to a claim under this Schedule if or to the extent that the claim falls within a case described in this paragraph (see also paragraph 4(5)). (2) Case A is where the amount paid, or liable to be paid, is excessive by reason of— (a) a mistake in a claim, election or notice, (b) a mistake consisting of making or giving, or failing to make or give, a claim, election or notice, (c) a mistake in allocating expenditure to a pool for the purposes of the Capital Allowances Act or a mistake consisting of making, or failing to make, such an allocation, or (d) a mistake in bringing a disposal value into account for the purposes of that Act or a mistake consisting of bringing, or failing to bring, such a value into account. (3) Case B is where the claimant is or will be able to seek relief by taking other steps under the Income Tax Acts or an enactment relating to the taxation of capital gains. (4) Case C is where the claimant— (a) could have sought relief by taking such steps within a period that has now expired, and (b) knew, or ought reasonably to have known, before the end of that period that such relief was available. (5) Case D is where the claim is made on grounds that— (a) have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or (b) have been put to Her Majesty's Revenue and Customs in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal (by virtue of section 54 (settling of appeals by agreement)). (6) Case E is where the claimant knew, or ought reasonably to have known, of the grounds for the claim before the latest of the following— (a) the date on which an appeal by the claimant relating to the amount paid, or liable to be paid, in the course of which the ground could have been put forward (a “relevant appeal”) was determined by a court or tribunal (or is treated as having been so determined), (b) the date on which the claimant withdrew a relevant appeal to a court or tribunal, and (c) the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal. (7) Case F is where the amount in question was paid or is liable to be paid— (a) in consequence of proceedings enforcing the payment of that amount brought against the claimant by Her Majesty's Revenue and Customs, or (b) in accordance with an agreement between the claimant and Her Majesty's Revenue and Customs settling such proceedings. (8) Case G is where— (a) the amount paid, or liable to be paid, is excessive by reason of a mistake in calculating the claimant's liability to income tax or capital gains tax (other than a mistake in a PAYE assessment or PAYE calculation), and (b) liability was calculated in accordance with the practice generally prevailing at the time. (9) Case H is where— (a) the amount paid, or liable to be paid, is excessive by reason of a mistake in a PAYE assessment or PAYE calculation, and (b) the assessment or calculation was made in accordance with the practice generally prevailing at the end of the period of 12 months following the tax year for which the assessment or calculation was made. (10) For the purposes of Cases G and H— (a) “PAYE assessment” means an assessment on the claimant made in accordance with section 709 of ITEPA 2003 (assessment in connection with PAYE deductions), and (b) “PAYE calculation” means a calculation of the amount of a deduction or repayment made or to be made under PAYE regulations in respect of tax estimated to be payable by the claimant. (3) (1) A claim under this Schedule may not be made more than 4 years after the end of the relevant tax year. (2) In relation to a claim made in reliance on paragraph 1(1)(a), the relevant tax year is— (a) where the amount paid, or liable to be paid, is excessive by reason of a mistake in a return or returns under section 8, 8A or 12AA of this Act, the tax year to which the return (or, if more than one, the first return) relates, and (b) otherwise, the tax year in respect of which the payment was made. (3) In relation to a claim made in reliance on paragraph 1(1)(b), the relevant tax year is the tax year to which the assessment, determination or direction relates. (4) A claim under this Schedule may not be made by being included in a return under section 8, 8A or 12AA of this Act. (4) (1) Sub-paragraph (2) applies where, under a relevant enactment, a person (“P”) is accountable to the Commissioners for— (a) an amount representing income tax or capital gains tax that is or is estimated to be payable by another person (“T”), or (b) any other amount that, under a relevant enactment, has been or is to be set off against a liability of T. (2) A claim under this Schedule in respect of the amount may be made only by T. (3) Sub-paragraph (4) applies where— (a) a person (“P”) has paid an amount described in sub-paragraph (1)(a) or (b) in the belief that P was accountable to the Commissioners for the amount under a relevant enactment, but (b) P was not so accountable. (4) A claim under this Schedule in respect of the amount may be made only by P. (5) The Commissioners are not liable to give effect to a claim under sub-paragraph (4) if or to the extent that the amount has been repaid to T or set against amounts payable to the Commissioners by T. (6) “Relevant enactment” means— (a) PAYE regulations, (b) Chapter 3 of Part 3 of the Finance Act 2004 or regulations under that Chapter (construction industry scheme), or (c) any other provision of or made under the Taxes Acts. (5) (1) This paragraph applies where— (a) a trade, profession or business is carried on by two or more persons in partnership, (b) an amount is paid, or liable to be paid, by one or more of those persons in accordance with a self-assessment, and (c) the amount is excessive by reason of a mistake in a partnership return. (2) A claim under this Schedule in respect of the amount— (a) may be made by the relevant partner nominated to make the claim by all of the relevant partners, and (b) may not be made by any other person. (3) In relation to such a claim, references in this Schedule to the claimant are to any of the relevant partners. (4) “Relevant partner” means— (a) a person who was a partner in the partnership at any time during the period in respect of which the partnership return was made, or (b) the personal representative of such a person. (6) (1) This paragraph applies where— (a) a claim is made under this Schedule, (b) the grounds for giving effect to the claim also provide grounds for a discovery assessment or determination on the claimant in respect of any chargeable period, and (c) such an assessment or determination could be made but for a relevant restriction. (2) “Discovery assessment or determination” means— (a) an assessment under section 29(1), or (b) a discovery assessment or discovery determination under Schedule 18 to the Finance Act 1998 (company tax return etc). (3) The following are relevant restrictions— (a) the conditions in section 29(3) to (5), (b) the restrictions in paragraphs 42 to 45 of Schedule 18 to the Finance Act 1998, and (c) the expiry of a time limit for making a discovery assessment or determination. (4) Where this paragraph applies— (a) the relevant restrictions are to be disregarded, and (b) the discovery assessment or determination is not out of time if it is made before the final determination of the claim. (7) (1) This paragraph applies where— (a) a claim is made under this Schedule, (b) the claimant is one of two or more persons carrying on a trade, profession or business in partnership, (c) the grounds for giving effect to the claim also provide grounds for amending, under section 30B(1) (discovery of loss of tax from partnership), a return made by the partnership or any of the partners in respect of any period, and (d) such an amendment could be made but for a relevant restriction. (2) The following are relevant restrictions— (a) the conditions in section 30B(4) to (6), and (b) the expiry of a time limit for making an assessment under that section. (3) Where this paragraph applies— (a) the relevant conditions are to be disregarded, and (b) the amendment is not out of time if it is made before the final determination of the claim. (8) (1) In paragraph 1(1)(a) the reference to an amount paid by way of income tax or capital gains tax includes an amount paid under a contract settlement in connection with income tax or capital gains tax believed to be due from any person. (2) Sub-paragraphs (3) to (6) apply if the person who paid the amount under the contract settlement (“the payer”) and the person from whom the tax was due (“the taxpayer”) are not the same person. (3) In relation to a claim under this Schedule in respect of that amount— (a) the references to the claimant in paragraph 2(5) to (7) (Cases D, E and F) have effect as if they included the taxpayer, (b) the references to the claimant in paragraph 2(8) and (10) (Cases G and H) have effect as if they were references to the taxpayer, (c) the references to the claimant in paragraphs 6(1)(b) and 7(1)(b) have effect as if they were references to the taxpayer, and (d) references to tax in Schedule 1A (as it applies to a claim under this Schedule) include such an amount. (4) Sub-paragraph (5) applies where the grounds for giving effect to a claim by the payer in respect of the amount also provide grounds for a discovery assessment or determination on the taxpayer in respect of any chargeable period. (5) The Commissioners may set any amount repayable to the payer by virtue of the claim against any amount payable by the taxpayer by virtue of the assessment or determination. (6) The obligations of the Commissioners and the taxpayer are discharged to the extent of any set-off under sub-paragraph (5). (7) In this paragraph— - “contract settlement” means an agreement made in connection with any person's liability to make a payment to the Commissioners under or by virtue of an enactment; - “discovery assessment or determination” has the same meaning as in paragraph 6. (9) (1) In this Schedule “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs. (2) For the purposes of this Schedule a claim is not finally determined until it, or the amount to which it relates, can no longer be varied (whether on appeal or otherwise).

Consequential amendments

3

TMA 1970 is amended as follows.

4

For the heading before section 32 substitute “Overpaid tax, excessive assessments etc”.

5

(1) Section 43A (further assessments etc) is amended as follows.

(2) After subsection (2A) insert—

(2B) For the purposes of this section and section 43B below, a claim under Schedule 1AB is relevant in relation to an assessment for a year of assessment if it relates to that year of assessment.

(3) In subsection (3), for “a claim” substitute “ any other claim ”.

6

(1) In paragraph 1 of Schedule 1A (claims etc not included in returns), in the definition of “partnership claim”, after “46(2)(b) of” insert “ , or paragraph 5 of Schedule 1AB to, ”.

7

(1) Paragraph 4 of that Schedule (giving effect to claims and amendments) is amended as follows.

(2) In sub-paragraph (1)—

(a) for “and (4)” substitute “ to (5) ”, and

(b) omit “and to any other provision in the Taxes Acts which otherwise provides”.

(3) In sub-paragraph (2), for “and (4)” substitute “ to (5) ”.

(4) Insert at the end—

(5) This paragraph has effect subject to any provision in the Taxes Acts that— (a) requires or allows effect to be given to a claim by other means, or (b) provides that an amount is not to be discharged or repaid.

8

In Schedule 3ZA (date by which payment to be made after amendment or correction of self-assessment), omit paragraph 10 (amendment following claim for error or mistake relief).

9

(1) Section 70H of CAA 2001 (lessee: requirement for tax return treating lease as long funding lease) is amended as follows.

(2) In subsection (2), for “for relief under the error or mistake provisions in respect of” substitute “ under the recovery provisions for relief in respect of an amount paid or liable to be paid that is excessive by reason of ”.

(3) In subsection (3)—

(a) for “ “the error or mistake provisions”” substitute “ ;the recovery provisions ”, and

(b) for “section 33 of” substitute “ Schedule 1AB to ”.

Transitional provision

10

(1) In relation to a relevant claim, paragraph 3(1) of Schedule 1AB to TMA 1970 (inserted by this Part of this Schedule) has effect as if for “more than 4 years after” there were substituted “ more than 5 years after the 31st January next following ”.

(2) “Relevant claim” means a claim within paragraph 3(2)(a) of Schedule 1AB to TMA 1970 that—

(a) is made before 1 April 2012 by a person other than a company, and

(b) satisfies sub-paragraph (3).

(3) A claim satisfies this sub-paragraph if notice requiring the return (or, if more than one, the first return) mentioned in paragraph 3(2)(a) of Schedule 1AB to TMA 1970 was not given within one year of the end of the tax year to which the return relates.

Saving for petroleum revenue tax

11

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Part 2 — Corporation tax

Claims for recovery of overpaid tax etc

12

Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.

13

For paragraph 51 (and the heading before that paragraph) substitute—

(51) (1) This paragraph applies where— (a) a person has paid an amount by way of tax but believes that the tax was not due, or (b) a person has been assessed as liable to pay an amount by way of tax, or there has been a determination or direction to that effect, but the person believes that the tax is not due. (2) The person may make a claim to the Commissioners for Her Majesty's Revenue and Customs for repayment or discharge of the amount. (3) Paragraph 51A makes provision about cases in which the Commissioners for Her Majesty's Revenue and Customs are not liable to give effect to a claim under this paragraph. (4) The following make further provision about making and giving effect to claims under this paragraph— (a) paragraphs 51B to 51F and Part 7 of this Schedule, and (b) Schedule 1A to the Taxes Management Act 1970 (which is applied by that Part). (5) Paragraph 51G makes provision about the application of this paragraph and paragraphs 51A to 51F to amounts paid under contract settlements. (6) The Commissioners for Her Majesty's Revenue and Customs are not liable to give relief in respect of a case described in sub-paragraph (1)(a) or (b) except as provided— (a) by this Schedule and Schedule 1A to the Taxes Management Act 1970 (following a claim under this paragraph), or (b) by or under another provision of the Corporation Tax Acts. (7) For the purposes of this paragraph and paragraphs 51A to 51G, an amount paid by one person on behalf of another is treated as paid by the other person. (51A) (1) The Commissioners for Her Majesty's Revenue and Customs are not liable to give effect to a claim under paragraph 51 if or to the extent that the claim falls within a case described in this paragraph (see also paragraph 51C(5)). (2) Case A is where the amount paid, or liable to be paid, is excessive by reason of— (a) a mistake in a claim, election or a notice, (b) a mistake consisting of making or giving, or failing to make or give, a claim, election or notice, (c) a mistake in allocating expenditure to a pool for the purposes of the Capital Allowances Act or a mistake consisting of making, or failing to make, such an allocation, or (d) a mistake in bringing a disposal value into account for the purposes of that Act or a mistake consisting of bringing, or failing to bring, such a value into account. (3) Case B is where the claimant is or will be able to seek relief by taking other steps under the Corporation Tax Acts. (4) Case C is where the claimant— (a) could have sought relief by taking such steps within a period that has now expired, and (b) knew, or ought reasonably to have known, before the end of that period that such relief was available. (5) Case D is where the claim is made on grounds that— (a) have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or (b) have been put to Her Majesty's Revenue and Customs in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal (by virtue of section 54 of the Taxes Management Act 1970 (settling of appeals by agreement)). (6) Case E is where the claimant knew, or ought reasonably to have known, of the grounds for the claim before the latest of the following— (a) the date on which an appeal by the claimant relating to the amount paid, or liable to be paid, in the course of which the ground could have been put forward (a “relevant appeal”) was determined by a court or tribunal (or is treated as having been so determined), (b) the date on which the claimant withdrew a relevant appeal to a court or tribunal, and (c) the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal. (7) Case F is where the amount in question was paid or is liable to be paid— (a) in consequence of proceedings enforcing the payment of that amount brought against the claimant by Her Majesty's Revenue and Customs, or (b) in accordance with an agreement between the claimant and Her Majesty's Revenue and Customs settling such proceedings. (8) Case G is where— (a) the amount paid, or liable to be paid, is excessive by reason of a mistake in calculating the claimant's liability to corporation tax, and (b) liability was calculated in accordance with the practice generally prevailing at the time. (51B) (1) A claim under paragraph 51 may not be made more than 4 years after the end of the relevant accounting period. (2) In relation to a claim made in reliance on paragraph 51(1)(a), the relevant accounting period is— (a) where the amount paid, or liable to be paid, is excessive by reason of a mistake in a company tax return or returns, the accounting period to which the return (or, if more than one, the first return) relates, and (b) otherwise, the accounting period in respect of which the amount was paid. (3) In relation to a claim made in reliance on paragraph 51(1)(b), the relevant accounting period is the accounting period to which the assessment, determination or direction relates. (4) A claim under paragraph 51 may not be made by being included in a company tax return. (51C) (1) Sub-paragraph (2) applies where a person (“P”) is accountable to the Commissioners for Her Majesty's Revenue and Customs under a relevant enactment for an amount that has been or is to be set off against a liability of another person (“T”) under a relevant enactment. (2) A claim under paragraph 51 in respect of the amount may be made only by T. (3) Sub-paragraph (4) applies where— (a) a person (“P”) has paid an amount described in sub-paragraph (1) in the belief that P was accountable to the Commissioners for the amount under a relevant enactment, but (b) P was not so accountable. (4) A claim under paragraph 51 in respect of the amount may be made only by P. (5) The Commissioners for Her Majesty's Revenue and Customs are not liable to give effect to a claim under sub-paragraph (4) if or to the extent that the amount has been repaid to T or set against amounts payable to the Commissioners by T. (6) “Relevant enactment” means— (a) Chapter 3 of Part 3 of the Finance Act 2004 or regulations under that Chapter (construction industry scheme), or (b) any other provision of or made under the Taxes Acts. (51D) (1) This paragraph applies where— (a) a trade, profession or business is carried on by two or more persons in partnership, (b) an amount is paid, or liable to be paid, by one or more of those persons in accordance with a self-assessment, and (c) the amount is excessive by reason of a mistake in a partnership return. (2) A claim under paragraph 51 in respect of the amount— (a) may be made by the relevant partner nominated to make the claim by all of the relevant partners, and (b) may not be made by any other person. (3) In relation to such a claim, references in paragraphs 51A to 51F to the claimant are to any of the relevant partners. (4) “Relevant partner” means— (a) a person who was a partner in the partnership at any time during the period in respect of which the partnership return was made, or (b) the personal representative of such a person. (51E) (1) This paragraph applies where— (a) a claim is made under paragraph 51, (b) the grounds for giving effect to the claim also provide grounds for a discovery assessment or discovery determination on the claimant in respect of any accounting period, and (c) such an assessment or determination could be made but for a relevant restriction. (2) The following are relevant restrictions— (a) the restrictions in paragraphs 42 to 45, and (b) the expiry of a time limit for making a discovery assessment or discovery determination. (3) Where this paragraph applies— (a) the relevant restrictions are to be disregarded, and (b) the discovery assessment or discovery determination is not out of time if it is made before the final determination of the claim. (4) A claim is not finally determined until it, or the amount to which it relates, can no longer be varied (whether on appeal or otherwise). (51F) (1) This paragraph applies where— (a) a claim is made under paragraph 51, (b) the claimant is one of two or more persons carrying on a trade, profession or business in partnership, (c) the grounds for giving effect to the claim also provide grounds for amending, under section 30B(1) of the Taxes Management Act 1970 (discovery of loss of tax from partnership), a return made by the partnership or any of the partners in respect of any period, and (d) such an amendment could be made but for a relevant restriction. (2) The following are relevant restrictions— (a) the conditions in section 30B(4) to (6) of the Taxes Management Act 1970, and (b) the expiry of a time limit for making an assessment under that section. (3) Where this paragraph applies— (a) the relevant conditions are to be disregarded, and (b) the amendment is not out of time if it is made before the final determination of the claim. (4) A claim is not finally determined until it, or the amount to which it relates, can no longer be varied (whether on appeal or otherwise). (51G) (1) In paragraph 51(1)(a) the reference to an amount paid by a company by way of tax includes an amount paid by a person under a contract settlement in connection with tax believed to be due. (2) Sub-paragraphs (3) to (6) apply if the person who paid the amount under the contract settlement (“the payer”) and the person from whom the tax was due (“the taxpayer”) are not the same person. (3) In relation to a claim under paragraph 51 in respect of that amount— (a) the references to the claimant in paragraph 51A(5) to (7) (Cases D, E and F) have effect as if they included the taxpayer, (b) the reference to the claimant in paragraph 51A(8) (Case G) has effect as if it were a reference to the taxpayer, (c) the references to the claimant in paragraphs 51E(1)(b) and 51F(1)(b) have effect as if they were references to the taxpayer, and (d) references to tax in Schedule 1A to the Taxes Management Act 1970 (as it applies to a claim under this Part of this Schedule) include such an amount. (4) Sub-paragraph (5) applies where the grounds for giving effect to a claim by the payer in respect of the amount also provide grounds for a discovery assessment or discovery determination on the taxpayer in respect of any chargeable period. (5) The Commissioners for Her Majesty's Revenue and Customs may set any amount repayable to the payer by virtue of the claim against any amount payable by the taxpayer by virtue of the assessment or determination. (6) The obligations of the Commissioners for Her Majesty's Revenue and Customs and the taxpayer are discharged to the extent of any set-off under sub-paragraph (5). (7) “Contract settlement” means an agreement made in connection with any person's liability to make a payment to the Commissioners for Her Majesty's Revenue and Customs under or by virtue of an enactment.

14

Accordingly, in the heading of Part 6, at the beginning insert “Overpaid tax,”.

15

(1) Paragraph 62 (consequential claims etc that may be made) is amended as follows.

(2) After sub-paragraph (1) insert—

(1A) This paragraph applies to a claim under paragraph 51 relating to the accounting period in respect of which the amendment or assessment is made.

(3) In sub-paragraph (2), for “a claim” substitute “ any other claim ”.

16

In paragraph 88 (conclusiveness of amounts stated in return), insert at the end—

(8) Nothing in this paragraph affects a power of the company making the return to make a claim under paragraph 51 (claim for relief for overpaid tax).

Consequential amendment

17

In Schedule 1A to TMA 1970 (claims etc not included in returns), in paragraph 1, in the definition of “partnership claim”, after “Act” insert “ or paragraph 51D of Schedule 18 to the Finance Act 1998 (claims for overpaid corporation tax) ”.

SCHEDULE 53

Part 1 — Special provision: amount carrying late payment interest

Payments on account and balancing payment

1

(1) This paragraph applies where as regards a tax year—

(a) payments on account are payable by a person (“P”),

(b) P makes a claim under section 59A(3) or (4) of TMA 1970 (reduction of payments on account) in respect of those amounts, and

(2) Late payment interest is to be calculated as if each of the payments on account had been equal to the lesser of the following amounts—

(a) the aggregate of that payment on account and 50% of the balancing payment, and

(b) the amount which would have been payable as a payment on account if the claim under section 59A(3) or (4) had not been made.

(3) In determining for the purposes of this paragraph what amount (if any) is payable by P as a balancing payment—

(a) it is to be assumed that both of the payments on account have been paid,

(b) no account is to be taken of any amount which has been paid on account otherwise than under section 59A(2) of TMA 1970, and

(4) In this paragraph—

“balancing payment” means an amount payable—in accordance with section 59B(3), (4) or (5) of TMA 1970, orin accordance with section 59B(6) of that Act in respect of income tax assessed under section 29 of that Act;

“payment on account” means an amount payable in accordance with section 59A(2) of TMA 1970.

Payments on account and overpayment

2

(1) This paragraph applies where as regards any person (“P”) and a tax year—

(a) payments on account become payable by P, and

(b) an overpayment becomes repayable to P.

(2) Late payment interest is payable only on the amount by which each of the payments on account exceeds 50% of the overpayment.

(3) In determining for the purposes of this paragraph what amount (if any) is repayable to P as an overpayment—

(a) no account is to be taken of any amount which has been paid on account otherwise than under section 59A(2) of TMA 1970, and

(b) no account is to be taken of any amount which is payable by way of capital gains tax.

(4) In this paragraph—

“overpayment” means an amount repayable in accordance with section 59B(3), (4) or (5) of TMA 1970;

“payment on account” means an amount payable in accordance with section 59A(2) of that Act.

Part 2 — Special provision: late payment interest start date

Amendments and discovery assessments etc

3

(1) This paragraph applies to any amount which is due and payable as a result of—

(a) an amendment or correction to an assessment or self-assessment (“assessment A”),

(b) an assessment made by HMRC in place of or in addition to an assessment (“assessment A”) which was made by a taxpayer, or

(2) The late payment interest start date in respect of that amount is the date which would have been the late payment interest start date if—

(a) assessment A had been complete and accurate and had been made on the date (if any) by which it was required to be made, and

(b) accordingly, the amount had been due and payable as a result of assessment A.

(3) In the case of a person (“P”) who failed to give notice in accordance with a requirement under section 7 of TMA 1970 (notice of liability to tax) that arose by virtue of subsection (1A) of that section, the reference in sub-paragraph (1)(c) to an assessment which ought to have been made by P is a reference to the assessment which P would have been required to make if an officer of Revenue and Customs had given notice under section 8 of that Act.

(4) In this paragraph “assessment” means any assessment or determination (however described) of any amount due and payable to HMRC.

Amounts postponed pending appeal under TMA 1970

4

(1) This paragraph applies to any amount if payment of the amount is postponed under section 55 of TMA 1970 pending the determination of an appeal against an assessment of income tax or capital gains tax.

(2) The late payment interest start date in respect of that amount is the date which would have been the late payment interest start date if there had been no appeal.

Overpayment of tax

5

(1) This paragraph applies to any amount of income tax or capital gains tax which is assessed and recoverable by virtue of an assessment under section 30 of TMA 1970 (recovery of overpayment of tax etc).

(2) The late payment interest start date in respect of that amount is 31 January next following the tax year in respect of which the assessment under section 30 is made.

Recovery of payment of tax credit or interest

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inheritance tax payable by instalments

7

(1) The late payment interest start date for each instalment of an amount to which this paragraph applies is the date on which that instalment is to be paid.

(2) This paragraph applies to any amount of inheritance tax which is payable by instalments under section 229 of IHTA 1984.

(3) This paragraph also applies to any amount of inheritance tax which is payable by instalments under section 227 of IHTA 1984 if the value on which the amount is payable is attributable to—

(a) the value of qualifying property within subsection (2)(b) or (c) of that section (shares or securities, or business or interest in a business), or

(b) value treated as reduced under Chapter 2 of Part 5 of that Act.

(4) But this paragraph does not apply to an amount by virtue of sub-paragraph (3)(a) if the qualifying property is shares or securities of a company which—

(a) falls within sub-paragraph (5), but

(b) does not fall within sub-paragraph (6) or (7).

(5) A company falls within this sub-paragraph if its business consists wholly or mainly of one or more of the following—

(a) dealing in securities, stocks or shares, land or buildings, or

(b) making or holding investments.

(6) A company falls within this sub-paragraph if its business consists wholly or mainly in being a holding company (as defined in section 1159 of the Companies Act 2006) of one or more companies not falling within sub-paragraph (5).

(7) A company falls within this sub-paragraph if its business is carried on in the United Kingdom and is—

(a) wholly that of a market maker, or

(b) that of a discount house.

(8) A company is a market maker if—

(a) it holds itself out at all normal times in compliance with the rules of The Stock Exchange as willing to buy and sell securities, stocks or shares at a price specified by it, and

(b) it is recognised as doing so by the Council of The Stock Exchange.

Certain other amounts of inheritance tax

8

An amount of inheritance tax which is underpaid in consequence of any of the following provisions—

(a) section 146(1) of IHTA 1984,

(b) section 19 of the Inheritance (Provision for Family and Dependants) Act 1975, or

does not carry late payment interest before the order mentioned in that provision is made.

9

In the case of an amount which is payable under section 147(4) of IHTA 1984, the late payment interest start date is the day after the end of the period of 6 months beginning with the date of the testator's death.

VAT due from persons not registered as required

10

(1) This paragraph applies where an amount of value added tax is due from a person (“P”) in respect of a period during which P was liable to be registered under VATA 1994 but was not registered.

(2) The late payment interest start date in respect of the amount is the date which would have been the late payment interest date in respect of that amount if P had become registered when P had first become liable to be so.

Unauthorised VAT invoices

11

(1) This paragraph applies where an unauthorised person issues an invoice showing an amount as being value added tax or as including an amount attributable to value added tax.

(2) The late payment interest start date in respect of the amount which is shown as being value added tax, or which is to be taken as representing value added tax, is the date of the invoice.

(3) In this paragraph “unauthorised person” has the meaning given in paragraph 2 of Schedule 41 to FA 2008.

Death of taxpayer

12

(1) This paragraph applies if—

(a) a person chargeable to an amount of revenue dies before the amount becomes due and payable, and

(b) the executor or administrator is unable to pay the amount before obtaining probate or letters of administration or (in Scotland) the executor is unable to pay the amount before obtaining confirmation.

(2) The late payment interest start date in respect of that amount is the later of the following—

(a) the date which would be the late payment interest start date apart from this paragraph, and

(b) the day after the end of the period of 30 days beginning with the grant of probate or letters of administration or (in Scotland) the grant of confirmation.

Part 3 — Special provision: date to which late payment interest runs

Deduction of income tax at source

13

(1) This paragraph applies to any income tax which—

(a) was payable under Chapter 15 of Part 15 of ITA 2007 (collection: deposit-takers, building societies and certain companies) in respect of payments within section 946 of that Act made in a return period,

(b) was not paid on the date when it was due under section 951 of that Act, and

(c) has subsequently been discharged or repaid under section 953 of that Act because the person who made the payments received payments on which it suffered income tax by deduction in a later return period.

(2) The income tax carries late payment interest until the earliest of—

(a) the date when the income tax was paid,

(b) the date when the person delivered a return for the later return period, and

but section 101 does not otherwise apply to the income tax.

(3) In this paragraph “return period” means a period for which a return is required to be made under Chapter 15 of Part 15 of ITA 2007.

Property accepted in lieu of inheritance tax

14

If, in the case of any amount of inheritance tax—

(a) HMRC agree under section 230 of IHTA 1984 to accept property in satisfaction of the amount, and

(b) under terms of that acceptance the value to be attributed to the property for the purposes of the acceptance is determined as at a date earlier than that on which the property is actually accepted,

the terms may provide that the amount of tax which is satisfied by the acceptance of the property does not carry late payment interest after that date.

Part 4 — Effect of interest on reliefs

15

(1) Where conditions A and B are met—

(a) the appropriate adjustment is to be made of the amount of late payment interest payable, and

(b) accordingly, the appropriate repayment (if any) is to be made of any late payment interest previously paid.

(2) Condition A is that any amount of late payment interest is payable on—

(a) any amount on account of income tax which is due and payable in accordance with section 59A(2) of TMA 1970, or

(b) any amount of income tax or capital gains tax which becomes due and payable in accordance with section 55 or 59B of TMA 1970.

(3) Condition B is that relief from the tax is given by a discharge of any of that amount of tax.

Paragraph 16 makes provision about the circumstances in which P is entitled to have a relief treated as being given by discharge.

(4) In this paragraph—

“the appropriate adjustment” is such adjustment as is necessary to secure that the total amount of late payment interest, if any, paid or payable on the amount of tax in question is the same as it would have been if the tax discharged had never been charged;

“the appropriate repayment” is such repayment as is necessary to give effect to the appropriate adjustment.

16

(1) Where—

(a) income tax or capital gains tax has been paid for a chargeable period (“period A”), and

(b) relief from any amount of that tax is given to a person (“P”) by repayment,

P is entitled to require that the amount repaid be treated for the purposes of paragraph 15(3), so far as it will go, as if it were a discharge of a qualifying charge to tax.

(2) A qualifying charge to tax is any amount of tax charged on P (whether alone or together with other persons) by or by virtue of any assessment for or relating to period A.

(3) But sub-paragraph (1) does not permit an amount to be applied—

(a) to any assessment made after the relief was given, or

(b) to more than one assessment so as to reduce, without extinguishing, the amount of tax charged.

SCHEDULE 54

Part 1 — Repayment interest start date: general rule

Introductory

1

(1) This Part sets out the general rule for determining the repayment interest start date.

(2) The general rule is subject to the special provision made by Part 2.

Repayment of amounts paid to HMRC

2

In the case of an amount which has been paid to HMRC, the repayment interest start date is the later of date A and (where applicable) date B.

3

Date A is the date on which the amount was paid to HMRC.

4

Date B is, in the case of an amount which—

(a) has been paid in connection with a liability to make a payment to HMRC, and

(b) is to be repaid by them,

the date on which the payment became due and payable to HMRC.

Payment of amounts on return or claim

5

(1) In the case of an amount which—

(a) has not been paid to HMRC, and

(b) is payable by virtue of a return having been filed or a claim having been made,

the repayment interest start date is the later of the dates mentioned in sub-paragraph (2).

(2) The dates are—

(a) the date (if any) on which the return was required to be filed or the claim was required to be made, and

(b) the date on which the return was in fact filed or the claim was in fact made.

Part 2 — Special provision as to repayment interest start date

Income tax deducted at source

6

In the case of a repayment of income tax deducted at source for a tax year, the repayment interest start date is 31 January next following that year.

Carry back of losses and averaging

7

In the case of any amount which is to be repaid as a result of a claim for relief under—

(a) paragraph 2 of Schedule 1B to TMA 1970 (carry back of loss relief from later year to earlier year), or

(b) Chapter 16 of Part 2 of ITTOIA 2005 (claim for averaging of profits of farmers etc over two consecutive years),

the repayment interest start date is 31 January next following the year that is the later year in relation to the claim.

MIRAS

8

In the case of any payment under regulations under section 375(8) of ICTA (MIRAS: payments equivalent to deductions which could have been made), the repayment interest start date is 31 January next following the tax year in which the interest payment mentioned in section 375(8)(c) was made.

Income accumulated under certain trusts

9

In the case of a repayment made in consequence of a claim under section 228 of the Income Tax Act 1952 (relief in respect of income accumulated under trusts), the repayment is to be treated as if it were a repayment of income tax paid by the claimant for the tax year in which the contingency mentioned in that section happened.

Certain amounts of inheritance tax

10

An amount of inheritance tax which is overpaid in consequence of any of the following provisions—

(a) section 146(1) of IHTA 1984,

(b) section 19 of the Inheritance (Provision for Family and Dependants) Act 1975, or

does not carry repayment interest before the order mentioned in that provision is made.

11

In the case of an amount which is repayable on a claim under section 146(2) or 150 of IHTA 1984, the repayment interest start date is the date on which the claim is made.

12

In the case of an amount which is repayable under section 147(2) of IHTA 1984, the repayment interest start date is the date on which the tax was paid.

Part 3 — Supplementary

Attribution of repayments

13

(1) This paragraph applies for the purpose of determining, for the purposes of this Schedule, how a repayment to a person (“P”) in respect of income tax for a tax year is to be attributed to payments made in respect of that tax.

(2) Such a repayment is to be attributed to payments in the following order—

(a) first, to so much of any payment made by P under section 59B of TMA 1970 as is a payment in respect of income tax for that year,

(b) second, in two equal parts to each of the payments (if any) made by P under section 59A of that Act on account of income tax for that year, and

(3) In so far as it is attributable to a payment made in instalments, a repayment is to be attributed to a later instalment before being attributed to an earlier one.

Interpretation

14

In this Schedule any reference to income tax deducted at source for a tax year is a reference to—

(a) income tax deducted (or treated as deducted) from any income, or treated as paid on any income, in respect of that year, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

but does not include a reference to amounts which, in that year, are deducted at source under PAYE regulations in respect of previous years.

SCHEDULE 55

Penalty for failure to make returns etc

1

(1) A penalty is payable by a person (“P”) where P fails to make or deliver a return, or to deliver any other document, specified in the Table below on or before the filing date.

(2) Paragraphs 2 to 1313J set out—

(a) the circumstances in which a penalty is payable, and

(b) subject to paragraphs 14 to 17, the amount of the penalty.

(3) If P's failure falls within more than one paragraph of this Schedule, P is liable to a penalty under each of those paragraphs (but this is subject to paragraph 17(3)).

(4) In this Schedule—

“filing date”, in relation to a return or other document, means the date by which it is required to be made or delivered to HMRC ...;

“penalty date”, in relation to a return or other document falling within any of items 1 to 3 2A and 5 to 13B in the Table, means the date on which a penalty is first payable for failing to make or deliver it (that is to say, the day after the filing date).

(4A) The Treasury may by order make such amendments to item 4 in the Table as they think fit in consequence of any amendment, revocation or re-enactment of the regulations mentioned in that item.

(5) In the provisions of this Schedule which follow the Table—

(a) any reference to a return includes a reference to any other document specified in the Table, and

(b) any reference to making a return includes a reference to delivering a return or to delivering any such document.

	Tax to which return etc relates	Return or other document
1	Income tax or capital gains tax	(a) Return under section 8(1)(a) of TMA 1970(b) Accounts, statement or document required under section 8(1)(b) of TMA 1970
2	Income tax or capital gains tax	(a) Return under section 8A(1)(a) of TMA 1970(b) Accounts, statement or document required under section 8A(1)(b) of TMA 1970
2A	Capital gains tax	Return under Schedule 2 to FA 2019 (other than one made under paragraph 9 or 15 of that Schedule)
3	Income tax or corporation tax	(a) Return under section 12AA(2)(a) or (3)(a) of TMA 1970(b) Accounts, statement or document required under section 12AA(2)(b) or (3)(b) of TMA 1970
4	Income tax	Return under any of the following provisions of the Income Tax (PAYE) Regulations 2003 (S.I. 2003/2682)—regulation 67B (real time returns)regulation 67D (exceptions to regulation 67B)
4A	Apprenticeship levy	Return under regulations under section 105 of FA 2016
5	Income tax	Return under section 254 of FA 2004 (pension schemes)
6	Deductions on account of tax under Chapter 3 of Part 3 of FA 2004 (construction industry scheme)	Return under regulations under section 70 of FA 2004
7	Corporation tax	Company tax return under paragraph 3 of Schedule 18 to FA 1998
7A	Value added tax	Return under regulations under paragraph 2 of Schedule 11 to VATA 1994
7AA	. . .	. . .
7AB	. . .	. . .
7B	Insurance premium tax	Return under regulations under section 54 of FA 1994
8	Inheritance tax	Account under section 216 or 217 of IHTA 1984
9	Stamp duty land tax	Land transaction return under section 76 of FA 2003 or further return under section 81 of that Act
10	Stamp duty land tax	Return under paragraph 3, 4 or 8 of Schedule 17A to FA 2003
11	Stamp duty reserve tax	Notice of charge to tax under regulations under section 98 of FA 1986
11A	Annual tax on enveloped dwellings	Annual tax on enveloped dwellings return under section 159 of FA 2013
11B	Annual tax on enveloped dwellings	Return of adjusted chargeable amount under section 160 of FA 2013
12	Petroleum revenue tax	Return under paragraph 2 of Schedule 2 to OTA 1975
13	Petroleum revenue tax	Statement under section 1(1)(a) of PRTA 1980
13A	Soft drinks industry levy	Return under regulations under section 52 of FA 2017
13B	Plastic packaging tax	Return under regulations under section 61 of FA 2021
14	Aggregates levy	Return under regulations under section 25 of FA 2001
15	Climate change levy	Return under regulations under paragraph 41 of Schedule 6 to FA 2000
16	Landfill tax	Return under regulations under section 49 of FA 1996
17	Air passenger duty	Return under regulations under section 38 of FA 1994
18	Alcohol duty	Return under regulations under section 88 of F(No.2)A 2023
19	Tobacco products duty	Return under regulations under section 7 of TPDA 1979
20	Hydrocarbon oil duties	Return under regulations under section 21 of HODA 1979
20A	Excise duties	Return under regulations under section 60A of the Customs and Excise Management Act 1979
21	Excise duties	Return under regulations under section 93 of the Customs and Excise Management Act 1979
22	Excise duties	Return under regulations under section 100G or 100H of the Customs and Excise Management Act 1979
23	General betting duty	Return under regulations under paragraph 2 of Schedule 1 to BGDA 1981
24	Pool betting duty	Return under regulations under paragraph 2A of Schedule 1 to BGDA 1981
25	Bingo duty	Return under regulations under paragraph 9 of Schedule 3 to BGDA 1981
26	Lottery duty	Return under regulations under section 28(2) of FA 1993
27	Gaming duty	Return under directions under paragraph 10 of Schedule 1 to FA 1997
28	Remote gaming duty	Return under regulations under section 26K of BGDA 1981
29	Machine games duty	Return under regulations under paragraph 18 of Schedule 24 to FA 2012

Amount of penalty: occasional returns and annual returns

2

Paragraphs 3 to 6 apply in the case of a return falling within any of items 1 to 3, 5 and 7 to 13 in the Table.

3

P is liable to a penalty under this paragraph of £100.

4

(1) P is liable to a penalty under this paragraph if (and only if)—

(a) P's failure continues after the end of the period of 3 months beginning with the penalty date,

(b) HMRC decide that such a penalty should be payable, and

(2) The penalty under this paragraph is £10 for each day that the failure continues during the period of 90 days beginning with the date specified in the notice given under sub-paragraph (1)(c).

(3) The date specified in the notice under sub-paragraph (1)(c)—

(a) may be earlier than the date on which the notice is given, but

(b) may not be earlier than the end of the period mentioned in sub-paragraph (1)(a).

5

(1) P is liable to a penalty under this paragraph if (and only if) P's failure continues after the end of the period of 6 months beginning with the penalty date.

(2) The penalty under this paragraph is the greater of—

(a) 5% of any liability to tax which would have been shown in the return in question, and

(b) £300.

6

(1) P is liable to a penalty under this paragraph if (and only if) P's failure continues after the end of the period of 12 months beginning with the penalty date.

(2) Where, by failing to make the return, P deliberately withholds information which would enable or assist HMRC to assess P's liability to tax, the penalty under this paragraph is determined in accordance with sub-paragraphs (3) and (4).

(3) If the withholding of the information is deliberate and concealed, the penalty is the greater of—

(a) 100% of any liability to tax which would have been shown in the return in question, and

(b) £300.

(3A) For the purposes of sub-paragraph (3)(a), the relevant percentage is—

(a) for the withholding of category 1 information, the relevant percentage,

(b) for the withholding of category 2 information, 150%, and

(4) If the withholding of the information is deliberate but not concealed, the penalty is the greater of—

(a) the relevant percentage of any liability to tax which would have been shown in the return in question, and

(b) £300.

(4A) For the purposes of sub-paragraph (4)(a), the relevant percentage is—

(a) for the withholding of category 1 information, 70%,

(b) for the withholding of category 2 information, 105%, and

(5) In any other caseany case not falling within sub-paragraph (2), the penalty under this paragraph is the greater of—

(a) 5% of any liability to tax which would have been shown in the return in question, and

(b) £300.

(6) Paragraph 6A explains the 3 categories of information.

Amount of penalty: CIS returns

7

Paragraphs 8 to 13 apply in the case of a return falling within item 6 in the Table.

8

P is liable to a penalty under this paragraph of £100.

9

(1) P is liable to a penalty under this paragraph if (and only if) P's failure continues after the end of the period of 2 months beginning with the penalty date.

(2) The penalty under this paragraph is £200.

10

(1) P is liable to a penalty under this paragraph if (and only if) P's failure continues after the end of the period of 6 months beginning with the penalty date.

(2) The penalty under this paragraph is the greater of—

(a) 5% of any liability to make payments which would have been shown in the return in question, and

(b) £300.

11

(1) P is liable to a penalty under this paragraph if (and only if) P's failure continues after the end of the period of 12 months beginning with the penalty date.

(2) Where, by failing to make the return, P deliberately withholds information which would enable or assist HMRC to assess the amount that P is liable to pay to HMRC in accordance with Chapter 3 of Part 3 of FA 2004, the penalty under this paragraph is determined in accordance with sub-paragraphs (3) and (4).

(3) If the withholding of the information is deliberate and concealed, the penalty is the greater of—

(a) 100% of any liability to make payments which would have been shown in the return in question, and

(b) £3,000.

(4) If the withholding of the information is deliberate but not concealed, the penalty is the greater of—

(a) 70% of any liability to make payments which would have been shown in the return in question, and

(b) £1,500.

(5) In any other caseany case not falling within sub-paragraph (2), the penalty under this paragraph is the greater of—

(a) 5% of any liability to make payments which would have been shown in the return in question, and

(b) £300.

12

(1) P is liable to a penalty under this paragraph if (and only if)—

(a) P's failure continues after the end of the period of 12 months beginning with the penalty date, and

(b) the information required in the return relates only to persons registered for gross payment (within the meaning of Chapter 3 of Part 3 of FA 2004).

(2) Where, by failing to make the return, P deliberately withholds information which relates to such persons, the penalty under this paragraph is—

(a) if the withholding of the information is deliberate and concealed, £3,000, and

(b) if the withholding of the information is deliberate but not concealed, £1,500.

13

(1) This paragraph applies—

(a) at any time before P first makes a return falling within item 6 in the Table, to any return falling within that item, and

(b) at any time after P first makes a return falling within that item, to that return and any earlier return.

(2) In respect of any return or returns to which this paragraph applies—

(a) paragraphs 10(2)(b) and 11(5)(b) do not apply, and

(b) P is not liable to penalties under paragraphs 8 and 9 which exceed, in total, £3,000.

(3) In sub-paragraph (1)(b) “earlier return” means any return falling within item 6 which has a filing date earlier than the date on which P first made a return.

Reductions for disclosure

14

(A1) In this paragraph, “relevant information” means information which has been withheld by a failure to make a return.

(1) Paragraph 15 provides for reductions in the penalty under paragraph 6(3) or (4) where P discloses relevant information that involves a domestic matter or 11(3) or (4), 11(3) or (4), 13E(3) or (4) or 13J(3) or (4) where P discloses relevant information.

(1A) Paragraph 15A provides for reductions in the penalty under paragraph 6(3) or (4) where P discloses relevant information that involves an offshore matter or an offshore transfer.

(1B) Sub-paragraph (2) applies where—

(a) P is liable to a penalty under paragraph 6(3) or (4) and P discloses relevant information that involves a domestic matter, or

(b) P is liable to a penalty under any of the other provisions mentioned in sub-paragraph (1) and P discloses relevant information.

(2) P discloses relevant information by—

(a) telling HMRC about it,

(b) giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld, and

(2A) Sub-paragraph (2B) applies where P is liable to a penalty under paragraph 6(3) or (4) and P discloses relevant information that involves an offshore matter or an offshore transfer.

(2B) P discloses relevant information by—

(a) telling HMRC about it,

(b) giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld,

(d) providing HMRC with additional information.

(2C) The Treasury must make regulations setting out what is meant by “additional information” for the purposes of sub-paragraph (2B)(d).

(2D) Regulations under sub-paragraph (2C) are to be made by statutory instrument.

(2E) An instrument containing regulations under sub-paragraph (2C) is subject to annulment in pursuance of a resolution of the House of Commons.

(3) Disclosure of relevant information—

(a) is “unprompted” if made at a time when P has no reason to believe that HMRC have discovered or are about to discover the relevant information, and

(b) otherwise, is “prompted”.

(4) In relation to disclosure “quality” includes timing, nature and extent.

(5) Paragraph 6A(4) to (5) applies to determine whether relevant information involves an offshore matter, an offshore transfer or a domestic matter for the purposes of this paragraph.

15

(1) Where a person who would otherwise be liable to a 100% penalty has made an unprompted disclosure, HMRC must reduce the 100% to a percentage, not below 30%, which reflects the quality of the disclosure.

If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.

(2) Where a person who would otherwise be liable to a 100% penalty has made a prompted disclosure, HMRC must reduce the 100% to a percentage, not below 50%, which reflects the quality of the disclosure.

But the standard percentage may not be reduced to a percentage that is below the minimum shown for it—

(a) in the case of a prompted disclosure, in column 2 of the Table, and

(b) in the case of an unprompted disclosure, in column 3 of the Table.

Standard %	Minimum % for prompted disclosure	Minimum % for unprompted disclosure
70%	35%	20%
100%	50%	30%

(3) Where a person who would otherwise be liable to a 70% penalty has made an unprompted disclosure, HMRC must reduce the 70% to a percentage, not below 20%, which reflects the quality of the disclosure.

(4) Where a person who would otherwise be liable to a 70% penalty has made a prompted disclosure, HMRC must reduce the 70% to a percentage, not below 35%, which reflects the quality of the disclosure.

(5) But HMRC must not under this paragraph—

(a) reduce a penalty under paragraph 6(3) or (4) below £300, or

(b) reduce a penalty under paragraph 11(3) or (4)sub-paragraph (3) or (4) of any of paragraphs 11, 13E and 13J below the amount set by paragraph 11(3)(b) or (4)(b) (as the case may be)paragraph (b) of that sub-paragraph.

Special reduction

16

(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

(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

(b) agreeing a compromise in relation to proceedings for a penalty.

Interaction with other penalties and late payment surcharges

17

(1) Where P is liable for a penalty under any paragraph of this Schedule which is determined by reference to a liability to tax, the amount of that penalty is to be reduced by the amount of any other penalty incurred by P, if the amount of the penalty is determined by reference to the same liability to tax.

(2) In sub-paragraph (1) the reference to “any other penalty” does not include—

(a) a penalty under any other paragraph of this Schedule, or

(b) a penalty under Schedule 56 (penalty for late payment of tax), or

(d) a penalty under Schedule 22 to FA 2016 (asset-based penalty).

(3) Where P is liable for a penalty under more than one paragraph of this Schedule which is determined by reference to a liability to tax, the aggregate of the amounts of those penalties must not exceed 100% the relevant percentage of the liability to tax.

(4) The relevant percentage is—

(a) if one of the penalties is a penalty under paragraph 6(3) or (4) and the information withheld is category 3 information, 200%,

(b) if one of the penalties is a penalty under paragraph 6(3) or (4) and the information withheld is category 2 information, 150%, and

Assessment

18

(1) Where P is liable for a penalty under any paragraph of this Schedule HMRC must—

(a) assess the penalty,

(b) notify P, and

(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 notification 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 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

(4) A supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of the liability to tax which would have been shown in a return.

(5) Sub-paragraph (6) applies if—

(a) an assessment in respect of a penalty is based on a liability to tax that would have been shown in a return, and

(b) that liability is found by HMRC to be excessive.

(6) HMRC may by notice to P amend the assessment so that it is based upon the correct amount.

(7) An amendment under sub-paragraph (6)—

(a) does not affect when the penalty must be paid;

(b) may be made after the last day on which the assessment in question could have been made under paragraph 19.

19

(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 (where it applies) date B.

(2) Date A is —

(a) in the case of an assessment of a penalty under paragraph 6C, the last day of the period of 2 years beginning with the end of the tax month in respect of which the penalty is payable,

(b) in the case of an assessment of a penalty under paragraph 6D, the last day of the period of 2 years beginning with the filing date for the relevant extended failure (as defined in paragraph 6D(10)), and

the last day of the period of 2 years beginning with the filing date.

(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 liability to tax which would have been shown in the return or returns (as the case may be in relation to penalties under section 6C or 6D), or

(b) if there is no such assessment, the date on which that liability is ascertained or it is ascertained that the liability is nil.

(4) In sub-paragraph (3)(a) “appeal period” means the period during which—

(a) an appeal could be brought, or

(b) an appeal that has been brought has not been determined or withdrawn.

(5) Sub-paragraph (1) does not apply to a re-assessment under paragraph 24(2)(b).

Appeal

20

(1) P may appeal against a decision of HMRC that a penalty is payable by P.

(2) P may appeal against a decision of HMRC as to the amount of a penalty payable by P.

21

(1) An appeal under paragraph 20 is to be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).

(2) Sub-paragraph (1) does not apply—

(a) so as to require P to pay a penalty before an appeal against the assessment of the penalty is determined, or

(b) in respect of any other matter expressly provided for by this Act.

22

(1) On an appeal under paragraph 20(1) that is notified to the tribunal, the tribunal may affirm or cancel HMRC's decision.

(2) On an appeal under paragraph 20(2) that is notified to the tribunal, the tribunal may—

(a) affirm HMRC's decision, or

(b) substitute for HMRC's decision another decision that HMRC had power to make.

(3) If the tribunal substitutes its decision for HMRC's, the tribunal may rely on paragraph 16—

(a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or

(b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 16 was flawed.

(4) In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.

(5) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 21(1)).

Reasonable excuse

23

(1) Liability to a penalty under any paragraph of this Schedule does not arise in relation to a failure to make a return if P satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal that there is a reasonable excuse for the failure.

If P satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal that there is a reasonable excuse for a failure to make a return—

(a) liability to a penalty under any paragraph of this Schedule does not arise in relation to that failure, and

(b) the failure does not count for the purposes of paragraphs 13B(2), 13C, 13G(2) and 13H.

(2) For the purposes of sub-paragraph (1)—

(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control,

(b) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure, and

(c) where P had a reasonable excuse for the failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Determination of penalty geared to tax liability where no return made

24

(1) References to a liability to tax which would have been shown in a return are references to the amount which, if a complete and accurate return had been delivered on the filing date, would have been shown to be due or payable by 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) 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 account is to be taken of any relief under section 458 of CTA 2010 (relief in respect of repayment etc of loan) which is deferred under subsection (5) of that section.

Partnerships

25

(1) This paragraph applies where—

(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 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.

(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 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;

“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

27

(1) This paragraph applies for the construction of this Schedule.

(2) The withholding of information by P is—

(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 the information has been withheld.

(2A) The Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

(3) “HMRC” means Her Majesty's Revenue and Customs.

(3A) Tax month” means the period beginning with the 6th day of a month and ending with the 5th day of the following month.

(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.

(5) References to an assessment to tax, in relation to inheritance tax and stamp duty reserve tax, are to a determination.

SCHEDULE 56

Penalty for failure to pay tax

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 8J set out—

(a) the circumstances in which a penalty is payable, and

(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 day after the date specified in or for the purposes of column 4 of the Table in relation to that amount..

(5) Sub-paragraph (4) is subject to paragraph 2A.

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