Accounting Errors Lead to Delayed Tax Penalties for Companies A and B

Delayed tax inaccuracies in Landfill Disposals Tax

A timing error in Landfill Disposals Tax can still lead to a penalty if tax or a credit is put in the wrong return period, even where the overall position is later corrected in another return. In these cases, the Welsh Revenue Authority may treat the issue as a delayed tax inaccuracy, with the penalty based on how long the tax treatment was delayed rather than on a permanent loss of tax.

• A delayed tax inaccuracy usually arises where one return is understated and a later return is correspondingly overstated, or where a credit is claimed too early.
• The key issue is whether the amount was included in the correct return at the correct time, not just whether the total tax across periods eventually balances out.
• The penalty loading is calculated by reference to the delay between the relevant filing dates, using a proportion of 5%; in the examples, a three-month delay gave a rate of 3/12 of 5%.
• The WRA may apply this approach even if no formal amendment is made, provided the later return effectively corrects the timing error.
• Taxpayer behaviour still matters: poor accounting systems or a failure to take reasonable care can still support a penalty, even where the tax was only delayed.
• In practice, the main difficulty is often proving that the error was only a timing issue, especially where records are unclear or the later return was not yet due.

Scroll down for the full analysis.

Delayed tax inaccuracies in Landfill Disposals Tax: when an error is corrected by timing rather than amendment

This page explains how the Welsh Revenue Authority approaches a Landfill Disposals Tax inaccuracy where tax is put into the wrong return period, so that one return is understated and another is correspondingly overstated. In these cases, the issue is not usually that tax disappears altogether, but that it is declared too early or too late. That matters because the penalty is calculated under the delayed tax rules, which are designed to reflect the length of the delay.

What this rule is about

Some return errors are timing errors. An amount that should have appeared in one quarterly return is instead included in a later one, or a credit is claimed in an earlier return when it should only have been claimed in a later return.

Where that happens, the tax position across the two returns may eventually balance out. But the legal problem is still real: the correct amount was not declared in the correct return at the correct time.

The official material deals with this as a delayed tax inaccuracy where there is both:

• an understatement in one return, and
• an overstatement in another return.

The practical consequence is that the penalty loading is based on the period of delay, rather than treating the whole amount as permanently lost tax.

What the official source says

The source gives two examples.

In the first, a landfill invoice was allocated to the wrong quarter because of an accounting system problem. This meant £10,000 of LDT was omitted from the first quarterly return and included instead in the second. The taxpayer had not taken remedial action, and the WRA concluded that the company had failed to take reasonable care because its accounting system was inadequate.

The WRA treated this as a delayed tax inaccuracy because the same £10,000 appeared as:

• an understatement in the first return, and
• an overstatement in the second return.

The delay was three months, being the period between the filing dates of the two returns. The penalty loading rate was therefore calculated as 3/12 of 5% of the delayed tax amount. On £10,000, that gave a figure of £125.

In the second example, a company claimed a £3,000 credit in one quarterly return when it should only have claimed it in the following quarter. At the time of the compliance check, the later return was not yet due. The WRA considered that the company’s accounting systems would not have resulted in the same credit being claimed again in the later return. On that basis, it still treated the matter under the delayed tax rules. Again, the delay was three months, and the penalty loading rate was 3/12 of 5%. On £3,000, that gave £37.50.

What this means in practice

The key point is that an inaccuracy can still attract a penalty even if the amount eventually appears elsewhere in the return cycle. The question is not only whether the tax is ultimately brought into account, but whether it was brought into account in the right period.

Where the WRA is satisfied that the error merely delayed the correct tax treatment, the penalty is based on that delay. This usually produces a lower figure than a penalty based on tax that has been permanently understated.

This approach can apply in two broad situations shown by the source material:

• tax that should have been declared in an earlier return is instead declared in a later one; or
• a credit is claimed too early, where the later return would not also have included the same credit again.

The examples also show that the taxpayer’s behaviour still matters. In the first example, the delayed tax treatment did not prevent a finding that the company had failed to take reasonable care. The delayed tax rules affect how the penalty amount is measured, not whether there was an inaccuracy in the first place.

How to analyse it

A sensible way to analyse this type of case is to ask the following questions.

• What amount was in the wrong return period?
• Did that create an understatement in one return and a matching overstatement in another?
• Was the amount effectively corrected by the later return, even if no formal amendment was made?
• If the issue is a premature credit, is it reasonable to conclude that the amount would not have been claimed again in the later return?
• What is the period between the relevant filing dates?
• What was the taxpayer’s behaviour, for example careless failure to maintain adequate systems?

If the answer shows that the tax was delayed rather than lost, the official material indicates that the penalty loading rate is calculated using the delayed tax formula: a proportion of 5% based on the length of the delay.

In the examples provided, a three-month delay between quarterly filing dates produces a rate of 3/12 of 5%.

Example

Illustration: a landfill operator should include £8,000 of LDT in the April to June return, but due to a booking error includes it in the July to September return instead. The later return therefore contains £8,000 that properly belonged in the earlier period. If the facts show this is simply a timing error and the WRA accepts there is both an understatement and a corresponding overstatement, the amount may be treated as a delayed tax inaccuracy. If the delay between filing dates is one quarter, the penalty loading rate would be based on 3/12 of 5% of £8,000.

Why this can be difficult in practice

The difficult issue is often not the arithmetic but the characterisation.

It may be straightforward where the same amount clearly appears in the wrong quarter and then in the next one. It can be harder where the taxpayer says an error would have been corrected later, but the later return was not yet due or the accounting records are unclear.

The second example is important for that reason. The WRA did not just assume the credit would have been repeated or not repeated. It formed a view about how the accounting system would have operated in the next return. That is a factual judgement.

Another practical difficulty is that taxpayers sometimes assume there is no penalty risk if the total tax over two periods is eventually right. The source material shows that this is not necessarily correct. A timing error can still be an inaccuracy, and careless systems can still lead to a penalty, even if the amount is only delayed.

Key takeaways

• If tax or credit is put into the wrong LDT return period, the WRA may treat the error as a delayed tax inaccuracy rather than a permanent loss of tax.
• The penalty loading rate is then based on the period of delay between the relevant filing dates, using the delayed tax rules.
• The existence of a delayed tax inaccuracy does not remove the need to consider behaviour, such as whether the taxpayer failed to take reasonable care.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Accounting Errors Lead to Delayed Tax Penalties for Companies A and B

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