Revenue Note for Guidance
Chapter 6 contains a number of provisions designed to improve tax compliance and deter tax evasion. Section 1084 provides for a surcharge to tax where returns are filed late. Section 1085 restricts certain corporation tax relief where returns are filed late. Section 1086 provides for the publication of certain tax defaulters’ names.
This section imposes a surcharge on any taxpayer, individual or corporate, for the late filing of a tax return.
The surcharge is based on a percentage increase in the total tax payable for the year for which the return is late and is subject to a grading of the surcharge by reference to the length of the delay in filing as well as being subject to an overall cap on the level of the surcharge.
With effect from the date of the passing of the Finance Act 2014, a taxpayer will not be liable to a surcharge where a penalty is applied under section 1077E for the deliberate or careless making of an incorrect return provided the return was made in a timely manner in the first instance.
(1)(a) “chargeable person” is a person who is a chargeable person for the purposes of Part 41A (that is, a person within the Self Assessment system).
“return of income” is a return, statement, declaration or list which a person is required to file with the inspector on foot of a notice under one or more of the specified provisions. It specifically includes a return which a chargeable person is required to file under Chapter 3 of Part 41A (that is, a Self Assessment return).
“specified return date for the chargeable period” has the meaning set out in section 950A.
The “specified provisions” are —
“tax” is income tax, corporation tax or capital gains tax, as the case may be.
(1)(b) The following different sets of circumstances explain what is regarded as a failure to make a timely return of income where a return of income is purported to have been made —
(l)(b)(iv) The application of the section to capital gains tax is ensured by providing that references to such of the specified provisions as are applied, subject to any necessary modification, in relation to capital gains tax by section 913, are regarded as including references to those sections as so applied.
(2)(a) Where a person is required to deliver a return of income to an inspector and fails to do so on or before the specified date, the amount of tax for that year of assessment or accounting period which is or would be contained in an assessment to tax made or to be made on the person concerned is to be increased by a surcharge amount equal to —
Where the tax contained in the assessment to tax is not the amount of tax as increased by the surcharge, the provisions of the Tax Acts and the Capital Gains Tax Acts, including in particular those relating to the collection and recovery of tax and the payment of interest on unpaid tax, apply as if the tax contained in the assessment were the amount of tax as increased by the surcharge. However, these collection and enforcement mechanisms will not apply in a case where the surcharge arises for the non-completion of the specified details in relation to exemptions, allowances, etc. on the tax return form. This means that such a surcharge will be included in an assessment and will as a consequence be capable of being appealed to the Appeal Commissioners.
(2)(b) In determining the amount of the surcharge the tax contained in the assessment is deemed to be reduced by the aggregate of —
In effect, in applying the surcharge any tax which is or has been paid by deduction (for example, PAYE tax) or any amounts which are set off against the tax in an assessment reduces the amount to which the surcharge is to be applied.
(3) A director within the meaning of section 116 or a person who is jointly assessed to tax under section 1017 or 1031C whose spouse or civil partner is a director within the meaning of section 116 is not entitled to have a credit for tax deducted at source under PAYE (as allowed by subsection (2)(b)(i)) taken into account to reduce the amount of tax to be surcharged. The effect of this provision means that a surcharge is imposed even where the director pays tax under PAYE.
(4) In the case of a new business the surcharge provisions of this section only apply to delays in filing from the second filing date of the business. This concession does not apply to new businesses where the promoter or owner has an existing business or where that person’s spouse or civil partner has an existing business in respect of which both spouses or civil partners are jointly assessed to tax.
(5) These “surcharge” provisions for late filing of returns apply to an amount of preliminary tax paid under Chapter 7 of Part 41A in the same manner as they apply to an amount specified in an assessment.
Relevant Date: Finance Act 2019