HMRC SDLT: SDLTM85905 – Compliance: Penalties and Interest

Compliance: Penalties and Interest

This section of the HMRC internal manual provides guidance on the principles and concepts related to compliance, penalties, and interest. It is aimed at ensuring adherence to tax regulations and understanding the repercussions of non-compliance.

• Explains the types of penalties applicable for non-compliance.
• Details how interest is calculated on unpaid taxes.
• Outlines the procedures for appealing against penalties.
• Provides examples of common compliance issues.

Compliance: Penalties and Interest (SDLTM85905)

Penalties Overview

When dealing with land transactions, it’s important to understand the penalties that may arise from non-compliance. There are several types of penalties that you could face if you do not adhere to the regulations:

– Fixed Penalties: These are set amounts that you will have to pay if you miss deadlines or fail to notify the necessary parties about your land transactions.
– Tax-geared Penalties: These penalties are related to the amount of tax due. If you end up paying less tax because you did not comply with the guidelines, you could face additional charges based on that shortfall.
– Daily Penalties: If you have not submitted your land transaction return on time, these are penalties that accumulate on a daily basis until your return is properly submitted.

If you want to know more about specific penalties for late notifications or late returns, refer to SDLTM50100.

In addition to these types of penalties, there are also penalties for providing incorrect information in your returns. When you submit a return that is either misleading or incorrect, you may incur a penalty for that as well. For information on this, you can visit the guidance link at http://intranet.prod.dop.corp.hmrc.gov.uk/manual/compliance-handbook/ch80000. External users can find the relevant guidance at www.hmrc.gov.uk/manuals/chmanual/CH80000.htm.

Understanding Penalties

To clarify these penalties, let’s look at some examples:

– Suppose you were due to submit a land transaction return by a specified date but failed to do so. You would be charged a fixed penalty, regardless of whether the tax owed was significant or minimal. This ensures that everyone adheres to submission deadlines.

– Now, imagine you submitted your return late but provided information that indicated a lower tax rate than you should have. In this case, you would not only face the fixed penalty for the late submission but also a tax-geared penalty because the tax amount due would be less than what should have been paid.

– If a return was due several days ago and you still haven’t submitted it, the daily penalties will continue to increase the longer you wait. This can add significant costs over time.

Key Responsibilities

As a taxpayer involved in land transactions, you have specific responsibilities regarding your returns and notifications:

– Notification: You must inform HMRC of certain land transactions within a specific time frame. Failing to do this could lead to penalties.

– Accuracy: Ensure that all the information you submit in your returns is correct. Providing false information, even unintentionally, can lead to penalties.

– Timeliness: Always submit your returns by the due date. Plan ahead to ensure all required information is available well before the deadline.

Examples of Incorrect Returns

Let’s look at some scenarios where incorrect returns might lead to penalties:

– If you report that a property was purchased for £150,000 instead of the actual £200,000, this could be deemed an incorrect return because it under-reports the transaction value. As a result, you could face a tax-geared penalty for underreporting your tax liability on the higher value.

– Another example could be submitting a return that mistakenly states the wrong property type. If you claim that a residential property was non-residential, this incorrect classification could lead to a serious tax penalty, as the tax rates differ significantly based on the property type.

Managing Your Penalties

If you find yourself facing penalties, it is vital to manage them effectively:

– Keep Records: Maintain detailed records of all transactions and returns. This can help if you need to contest a penalty.

– Seek Guidance: Do not hesitate to consult with HMRC or a professional advisor if you are unsure about your responsibilities or the information you need to provide.

– Timely Communication: If you realize you may have submitted a late or incorrect return, contact HMRC as soon as possible to discuss your situation. Points of communication can sometimes lead to a reduction or waiver of penalties, depending on the circumstances.

Payment of Penalties

If you incur penalties, it’s important to understand how to manage these payments. Here are the steps you should take:

– Understand the Amount: Make sure you know how much you owe and why. Penalty notices will usually provide a breakdown of the charges.

– Payment Options: You may be able to pay penalties in instalments, depending on the circumstances. Contact HMRC to discuss payment arrangements.

– Dispute Process: If you feel the penalty is unfair or incorrect, you can formally dispute it. This process involves providing evidence and explanation to HMRC.

Conclusion

While this guidance does not provide a concluding statement, it outlines the essential aspects of compliance penalties and interests associated with land transactions. By understanding your responsibilities and being proactive, you can manage potential penalties effectively.

For further details, refer to the appropriate HMRC guidelines to stay informed about compliance requirements for land transactions. If you have specific questions about your situation, reaching out to HMRC or consulting a tax professional can provide tailored advice.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM85905 – Compliance: Penalties and Interest

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