V3a. Penalties for late payment

Time to pay agreement in place: no penalty

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"(1) This section applies if—

(a) a person (“P”) fails to pay an amount of tax falling within the Table in subsection (5) when it becomes due and payable,

(b) P makes a request to an officer of Revenue and Customs that payment of the amount of tax be deferred, and

(c) an officer of Revenue and Customs agrees that payment of that amount may be deferred for a period (“the deferral period”).

(2) P is not liable to a penalty for failing to pay the amount mentioned in subsection (1) if—

(a) the penalty falls within the Table, and

(b) P would (apart from this subsection) become liable to it between the date on which P makes the request and the end of the deferral period." (FA 2009, s.108)

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See FA 2009, Sch 56, para 10 to similar effect for other taxes.

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Taxes covered

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"(5) The taxes and penalties referred to in subsections (1) and (2) are—

Value added tax:    Surcharge under section 59(4) or 59A(4) of VATA 1994
Aggregates levy:   Penalty interest under paragraph 5 of Schedule 5 to FA 2001
Climate change levy:    Penalty interest under paragraph 82 of Schedule 6 to FA 2000
Landfill tax:   Penalty interest under paragraph 27(2) of Schedule 5 to FA 1996
Insurance premium tax:    Penalty under paragraph 15(2) or (3) of Schedule 7 to FA 1994 which is payable by virtue of paragraph 15(1)(a) of that Schedule.
Any duty of excise:    Penalty under section 9(2) or (3) of FA 1994 which is imposed for a failure to pay an amount of any duty of excise or an amount payable on account of any such duty."  (FA 2009, s.108)

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"(10) In this section, except in the entries in the Table, “penalty” includes surcharge and penalty interest." (FA 2009, s.108)

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Breaking the agreement

 

"(3) But if—

(a) P breaks the agreement (see subsection (4)), and

(b) an officer of Revenue and Customs serves on P a notice specifying any penalty to which P would become liable apart from subsection (2),

P becomes liable, at the date of the notice, to that penalty.

(4) P breaks an agreement if—

(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." (FA 2009, s.108)

 

Varying the agreement

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"(6) If the agreement mentioned in subsection (1)(c) is varied at any time by a further agreement between P and an officer of Revenue and Customs, this section applies from that time to the agreement as varied." (FA 2009, s.108)

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- Only applies to defaults during currency of agreement 

 

"[49] This provision relates to deferred payments during the currency of an agreement to that effect. The agreement must be reached prior to the default. This was not the situation that arose in the appeal before us. Whilst the Appellant was making monthly payments to HMRC, the incontrovertible fact in this appeal is that those payments were not in accordance with an agreed TTP plan in respect of the period 12/20. The Appellant cannot, therefore, rely on the provisions of s. 108." (Desser & Co Ltd v. HMRC [2023] UKFTT 662 (TC), Judge Manyarara)

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PAYE payment tolerance

 

"(1) A payment that is less than the full amount due under regulation 67G(2) (payments to and recoveries from HMRC for each tax period), as adjusted by regulation 67H (payments due and recoveries from HMRC for each tax period: returns under regulation 67E(6)) where appropriate, will for the purposes of paragraph 6(2) of Schedule 56 to the Finance Act 2009 (amount of penalty: PAYE and CIS) be treated as payment of the full amount if the difference between the full amount and the amount paid is no more than £100 (“the tolerance”), but this is subject to paragraphs (2) and (3)." (SI 2003/2682, r.69A)

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Disapplication for supplemental return correcting inaccuracy after end of tax year

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"(2) Paragraph (1) does not apply where—

(a) the payment relates to a return which is correcting information given in a return filed in respect of a relevant payment made in an earlier tax month, and

(b) the return is delivered after 19th April following the end of the tax year in question." (SI 2003/2682, r.69A)

 

Sum paid includes additional amounts: apply tolerance to total sum

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"(3) If the total sum paid by the employer to HMRC for the tax period includes not only the amount due under regulation 67G(2), as adjusted by regulation 67H where appropriate, but also one or more of—

(a) any earnings-related contributions (as defined by regulation 1(2) of the SSC Regulations 2001),

(b) any payment under regulation 7(1) of the Income Tax (Construction Industry Scheme) Regulations 2005, or

(c) any repayment due under the Student Loans Regulations,

the tolerance is applied to the total sum paid to HMRC for the tax period to which the payments relate." (SI 2003/2682, r.69A)

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