Late payment penalties for income, capital gains and corporation tax

By Tolley in association with Philip Rutherford
Late payment penalties for income, capital gains and corporation tax

The following Owner-Managed Businesses guidance note by Tolley in association 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, Class 2 and Class 4 NIC
  • Corporation tax
  • Reasonable excuse
  • Making Tax Digital: sanctions for late submission and late payment

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.

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.

Since 18 November 2015, HMRC has had the ability to instruct banks and building societies to deduct amounts to settle taxpayers' tax debts directly from their bank accounts, often referred to as the ‘direct recovery of debt’ (DRD) provisions. As a result of these, it is less likely that more than one late payment penalty will be issued by HMRC, as the tax can be directly recovered from the debtor’s bank account. For more details, see the Direct recovery of debts 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, Class 2 and Class 4

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