Read the original guidance here:
HMRC SDLT: Compliance Penalties and Interest: Penalties, Interest, and Relevant Date Information

Understanding Compliance: Penalties and Interest

This article explains the rules regarding penalties and interest imposed by HMRC when dealing with Stamp Duty Land Tax (SDLT) compliance. It highlights the importance of meeting tax obligations on time and the consequences of failing to do so.

Overview of Penalties

Penalties are charges that HMRC imposes for failing to comply with SDLT regulations. Understanding these penalties can help you avoid them in the first place.

• Late Filing Penalty: If you do not submit your SDLT return within the required timeframe, HMRC will impose a late filing penalty. This penalty usually applies after 15 days of the deadline.
• Late Payment Penalty: If you don’t pay the tax owed on time, you may receive a late payment penalty. This penalty is based on how late the payment is.
• Reasonable Excuse: If you miss a deadline, you might avoid penalties if you can demonstrate a reasonable excuse. For instance, if you faced a serious illness or an unavoidable event that prevented compliance.

Calculating the Late Filing Penalty

If you fail to file your SDLT return on time, the penalties increase based on how late you are:

• If you file within 1 day of the deadline: £100 penalty.
• If you file between 1 and 3 months late: An additional £200 penalty might apply, making the total £300.
• If you are more than 3 months late, the penalty is £300 plus 5% of the unpaid tax.

For example, if you owed £1,000 in SDLT and submitted your return four months late, your penalty would be £300 plus an additional £50 (5% of £1,000), resulting in a total penalty of £350.

Late Payment Penalties Explained

Late payment penalties are also tiered:

• First 30 Days: If the payment is late by less than 30 days, there is no penalty.
• Between 30 and 90 Days: A penalty of 5% of the unpaid tax amount will be charged.
• After 90 Days: An additional 5% penalty will apply if the tax remains unpaid for over 90 days, in addition to the initial 5% penalty.

Understanding Interest on Unpaid Tax

HMRC charges interest on late payments of SDLT. This interest is calculated from the due date until you pay the tax owed. The standard interest rate is determined periodically by HMRC.

• Interest Rate: The interest rate can change but is typically based on the Bank of England rate plus a certain percentage. Always check HMRC’s latest announcements for the current rate.
• Calculation: Interest is calculated daily and added to the tax owed.
• Payment Responsibility: You are responsible for paying the interest along with the SDLT owed.

Example of Interest Calculation

Consider you owe £1,000 in SDLT, and you pay it 100 days late. If the interest rate is set at 3%, the daily interest would be £1,000 x (3% / 365). This gives a daily interest of approximately £0.082. Over 100 days, the interest would accumulate to approximately £8.20, which you would owe in addition to the unpaid SDLT.

Relevant Dates and Their Importance

Knowing the relevant dates is essential to avoid penalties and interest. Major dates in SDLT compliance include:

• Submission Deadline: The SDLT return must be submitted within 14 days of the effective date of the transaction (the date you become liable for SDLT).
• Payment Due Date: The tax payment is due on the same date as the submission deadline.

Example of Relevant Dates

Imagine you purchased a property on 1st March. The effective date for SDLT would be 1st March, meaning your SDLT return is due by 15th March, and you must pay any SDLT owed by the same date. If you miss this, you could face penalties.

Dealing with Penalties and Interest

If you receive a notice of penalty or interest from HMRC, you have options:

• Pay Promptly: It is best to pay any outstanding amounts quickly to minimize further charges.
• Appeal: If you believe you’ve received a penalty incorrectly, you have the right to appeal. Ensure you provide evidence for your appeal.
• Payment Arrangements: If you cannot pay immediately, contact HMRC to discuss payment plans or options that may be available.

Conclusion

This guide serves as a clear explanation of the penalties and interest associated with Stamp Duty Land Tax. Make sure to adhere to deadlines, understand policies on penalties and interest, and communicate with HMRC if you face issues. For more information, refer to SDLTM85905 for penalties or SDLTM85910 for interest guidelines, and SDLTM85930 for the relevant date instructions.