Late payment penalties for income, capital gains and corporation tax

By Tolley in partnership with Philip Rutherford
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The following Personal Tax guidance note by Tolley in partnership with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Late payment penalties for income, capital gains and corporation tax
  • Introduction
  • The law
  • Income tax, capital gains tax and Class 4 NIC
  • Surcharges for the 2009/10 tax year and previous years
  • Corporation tax
  • Reasonable excuse

Introduction

The late payment of tax will invariably attract interest as outlined in the Interest on late paid tax guidance note. In addition, the late payment of tax will generally attract a late payment penalty. There are a number of regimes in place across the various taxes. For example there are different regimes in place for taxes covered by income tax self assessment (ITSA), VAT and corporation tax self assessment (CTSA). While there has been some harmonisation of the rules, there is by no means one standard set of rules across all heads of tax.

This guidance note covers penalties on late paid tax under ITSA and CTSA. For the late payment of VAT please refer to the Default surcharge guidance note (subscription sensitive).

For late paid income tax and Class 1 national insurance contributions (NIC) that should have been paid over through the PAYE system, see the Late payment penalties for PAYE/NIC guidance note.

The law

The first coherent attempt to capture a number of the late payment penalties into one place was made by FA 2009, Sch 56. This schedule provides a guide to determine which provisions are in force for the late payment of tax.

Income tax, capital gains tax and Class 4 NIC

From 6 April 2011 a new penalty regime was introduced for the late payment of tax. This covers returns from the 2010/11 tax year onwards and covers income tax, capital gains tax and Class 4 NIC.

From 2015/16 this penalty regime also applies to Class 2 NIC, ie the figure of tax outstanding for the purposes of calculating the tax geared penalty includes any Class 2 arrears. This is because Class 2 NIC is collected via the tax return from 2015/16. However any Class 2 arrears from 2014/15 and earlier tax years are

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