HMRC SDLT: SDLTM85900 – Compliance: Penalties and Interest

Compliance: Penalties and Interest

This section of the HMRC internal manual provides guidance on compliance related to penalties and interest. It outlines the principles and concepts necessary for understanding the application of penalties and interest in tax matters.

• Explains the criteria for imposing penalties.
• Details the calculation of interest on unpaid taxes.
• Provides examples of compliance scenarios.
• Discusses the appeal process for penalties.
• Offers guidance on mitigating penalties.

Understanding Compliance: Penalties and Interest in Stamp Duty

Introduction

When it comes to stamp duty, it is important to understand the rules around compliance, penalties, and interest. This guidance aims to clarify these aspects, so taxpayers can avoid issues and ensure they meet their obligations.

Penalties for Non-Compliance

If you fail to comply with stamp duty regulations, you may face penalties. These penalties are put in place to encourage timely and accurate submissions. Here are the key points regarding penalties:

• Types of Penalties: There are generally two types of penalties: fixed penalties and tax geared penalties.
• Fixed Penalties: If you fail to submit your stamp duty return on time, you may incur a fixed penalty. For example, if your return is one day late, a penalty may be applied. This penalty is often a set amount.
• Tax Geared Penalties: In some cases, the penalty may be calculated as a percentage of the unpaid tax. For instance, if you should have paid £1,000 in stamp duty but didn’t, you may receive a penalty based on that amount.
• Further Delays: If your payment or return is late, further penalties can be added for continued non-compliance. For example, a second fixed penalty may apply if the return remains unpaid after a certain timeframe.

How to Avoid Penalties

To ensure you don’t incur penalties, it is best to follow these practices:

• Timely Submission: Ensure you submit your return and payment on or before the deadline. Planning ahead can prevent last-minute issues.
• Accurate Information: Double-check the details you provide in your return. Mistakes can lead to delays and potential penalties.
• Use Online Services: The HMRC digital services can simplify the submission process. Consider using these platforms for ease and efficiency.

Interest on Unpaid Tax

If you do not pay your stamp duty on time, you will also be charged interest on any overdue amount. Interest accrues from the date the payment was due until the date it is paid in full. Understanding interest can help in calculating how much you owe.

• Interest Calculation: The interest is calculated based on the amount of unpaid tax. For example, if you owe £500 in stamp duty and are a month late, you will incur interest on that amount.
• Current Interest Rates: HMRC updates their interest rates regularly. Make sure to check the current rates to understand how much interest will be charged on any unpaid amount.
• Charging Dates: Interest starts to accrue from the day after the payment was due. If your payment is due on 1st January and you pay on 10th January, interest applies for the nine days that the payment was late.

Key Dates for Compliance

Understanding key dates is essential for stamp duty compliance. Here are the main dates you need to keep track of:

• Relevant Date: This is the date on which the transaction requiring stamp duty takes place. It is crucial to note this date for calculating when payments are due.
• Submission Deadlines: Typically, you must submit your stamp duty return within a specific timeframe after the transaction. This deadline is often 14 days after the relevant date.
• Payment Deadlines: Payment for stamp duty should be made by the same deadline as your return submission. Failing to do so will lead to penalties and interest.

Examples of Compliance Issues

Let’s examine a couple of examples to illustrate how compliance failures can lead to penalties and interest:

• Example 1 – Late Submission: Sarah purchased a property on 1st June. According to HMRC rules, her stamp duty return was due by 15th June. However, she forgot to submit it until 20th June. As a result, she may receive a fixed penalty for the late return.
• Example 2 – Unpaid Tax: John bought a commercial property and owed £2,000 in stamp duty, which was due on 1st July. He didn’t pay until 15th July, incurring interest for the 14 days his payment was overdue. If HMRC’s interest rate was 3%, he would need to calculate the additional amount added to his outstanding balance due to the late payment.

Conclusion on Compliance Issues

Understanding the implications of delays in submission and payment is essential for maintaining compliance with HMRC’s stamp duty regulations. Knowing the penalties and interest rates can help prepare for potential costs associated with non-compliance.

For more guidance, feel free to explore specific pages, such as those on penalties (see SDLTM85905) and interest (see SDLTM85910). If you need clarification on the relevant dates for submissions, refer to SDLTM85930.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM85900 – Compliance: Penalties and Interest

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