ACCA Applied Skills · Taxation (UK)

Penalties for non-compliance: formula sheet

Full chapter guide

Key formulas

Individual: initial fixed penalty: £100 if the return is filed after the deadline; Applies even if there is no tax to pay.
Individual: daily penalties: £10 × days late (from 3 months late), maximum 90 days = £900; Only starts once the return is three months late. Do not count the first three months.
Individual: tax-geared penalty: Greater of 5% × tax due and £300, at 6 months late and again at 12 months late; Tax due means the tax outstanding that the return should have shown, not the total liability. Both the six-month and the twelve-month penalty use this same rule. Any higher amount for deliberate withholding of information is outside the standard ladder and the ACCA tables.
Company: fixed penalties: £100 (late) + £100 (more than 3 months late) = £200; Higher fixed penalties for repeated lateness are not in the ACCA tables. Check your study text before using them.
Company: tax-geared penalty: 10% × unpaid tax if more than 6 months late, plus a further 10% only if more than 12 months late; Between six and twelve months late, charge 10% once. Charge the second 10% only past twelve months. No minimum amount. A higher rate for persistent lateness is not in the ACCA tables, so check your study text before using it.
Filing deadlines: Individual online: 31 January after the tax year (paper: 31 October). Company: 12 months after the end of the period of account; Penalties run from these dates.
Interest on underpaid tax: Tax unpaid × 8.50% × months late ÷ 12; Use the rate given in the ACCA tax tables. Run from the due date to the payment date. Round to the nearest £.
Self assessment late payment penalty: 5% × tax unpaid at 30 days + 5% × tax unpaid at 6 months + 5% × tax unpaid at 12 months; Each point is measured from the due date. Charge only on tax still unpaid at that point. Applies to the balancing payment.
Interest on overpaid tax: Tax overpaid × 3.50% × months ÷ 12; Paid by HMRC to the taxpayer. Do not use 8.50% here.
Corporation tax due date: 9 months and 1 day after the end of the accounting period; A large company has profits over £1,500,000, divided by the number of associated companies plus one. It pays instalments in months 7, 10, 13 and 16 after the start of the period. Interest runs from the instalment dates.
Penalty: Penalty = PLR × penalty percentage; PLR is the extra tax due because of the error. The percentage must fall within the range for the behaviour and disclosure type.
Careless error: Maximum 30%; minimum 0% (unprompted); minimum 15% (prompted); Failure to take reasonable care.
Deliberate but not concealed: Maximum 70%; minimum 20% (unprompted); minimum 35% (prompted); The taxpayer knew the return was wrong but did not hide it.
Deliberate and concealed: Maximum 100%; minimum 30% (unprompted); minimum 50% (prompted); The taxpayer knew and also took steps to hide the error.
Late submission penalty points: 1 point per late return; £200 penalty per late return once threshold reached; Under HMRC rules the threshold is 4 points for quarterly returns (5 monthly, 2 annual). These thresholds and the £200 figure are not in ACCA's tax rates table, so confirm against the current TX-UK syllabus. No penalty before the threshold.
Late VAT payment penalty (ACCA table): Up to 15 days: nil | 16 to 30 days: 3% | over 30 days: 6% + daily penalty at 10% a year; Percentage applies to the VAT unpaid. Check the date the VAT was due, then count days late.
Daily penalty: Unpaid VAT × 10% × days ÷ 365; Applies only to payments more than 30 days late. ACCA's table does not give the day count. Assume it runs from day 31 unless the question says otherwise, and state the assumption. Exam questions usually test the 3% or 6% rate, so read the question for what is asked.
Late payment interest: Unpaid VAT × interest rate × days late ÷ 365; Use the rate given in the question. ACCA's table gives an assumed 8.50% on underpaid tax. Runs from the due date to the payment date.
Standard penalties for errors: Deliberate and concealed: max 100% (min 30% unprompted, 50% prompted) | Deliberate not concealed: max 70% (20%, 35%) | Careless: max 30% (0%, 15%); Applied to the extra VAT due because of the error. Not a late payment penalty.
VAT registration limit: Registration £90,000; deregistration £88,000; Useful for late registration questions. Standard rate is 20%.
Individual with business or property income: Keep records until 5 years after the 31 January following the end of the tax year; Example: tax year 2025/26 ends 5 April 2026. The 31 January deadline is 31 January 2027. Keep records until 31 January 2032.
Individual with no business or property income: Keep records until 1 year after the 31 January following the end of the tax year; Example: tax year 2025/26 gives 31 January 2027 plus 1 year, so 31 January 2028.
Company: Keep records for 6 years from the end of the accounting period; The period runs from the accounting period end, not from the filing date.
Penalty for failing to keep or preserve records: Maximum £3,000 for each failure; Applies to income tax and corporation tax. Separate from the error penalty percentages.
VAT records: Keep VAT records for 6 years; A registered trader keeps VAT records for 6 years.

Quick revision

Late filing, late payment, errors, VAT and records are separate regimes. Identify the regime before you calculate.
VAT standard rate is 20%. The registration limit is £90,000 and the deregistration limit is £88,000.
VAT late payment: no penalty up to 15 days late; 3% for 16 to 30 days; 6% plus a daily penalty at an annual rate of 10% for more than 30 days.
Error penalties are a percentage of the potential lost revenue, and the percentage depends on behaviour.
Careless: maximum 30%, minimum 0% if unprompted and 15% if prompted.
Deliberate but not concealed: maximum 70%, minimum 20% unprompted and 35% prompted.
Deliberate and concealed: maximum 100%, minimum 30% unprompted and 50% prompted.
Unprompted disclosure gets a lower minimum than prompted disclosure, so disclose before HMRC asks.
Interest on underpaid tax is 8.50% and on overpaid tax is 3.50% in the tax rates provided.
Corporation tax with profits over the £1,500,000 threshold pays by quarterly instalments, so check due dates for large companies.
Know the retention periods for records by taxpayer type, and that failing to keep records can lead to a penalty.
Write the base amount and the days or months late in every answer so that method marks are available.

Common mistakes

Counting daily penalties from the deadline instead of from three months late. Fix: Daily penalties begin only after the return is three months late. Cap them at 90 days, £900.
Forgetting the £300 minimum on the individual six-month penalty. Fix: Always compare 5% of tax due with £300 and take the greater.
Charging the penalty on the total tax liability instead of the unpaid balancing payment. Fix: Start with the balancing payment only, and use the amount still unpaid at each penalty point.
Applying all three 5% penalties whenever the tax is late. Fix: Test the payment date against each of the three points. Only the points already passed count.
Applying the percentage to the understated income instead of the extra tax. Fix: Work out the extra tax first. That is the PLR. Apply the percentage to it.
Mixing up prompted and unprompted minimums. Fix: Unprompted is always the lower minimum. Prompted minimums are higher: 15%, 35% and 50%.
Charging £200 on every late return from the first one. Fix: Count points. The first three late quarterly returns carry no financial penalty.
Using the old default surcharge rates of 2%, 5%, 10% and 15%. Fix: Use the points system for late returns and the ACCA table for late payment: 3% for 16 to 30 days and 6% plus daily penalty over 30 days.
Counting the 5 years from 5 April, the end of the tax year. Fix: Start from the 31 January filing deadline after the tax year end, then add 5 years.
Using 5 years for every individual. Fix: Ask whether there is business or property income. If not, the period is only 1 year after 31 January.

Exam tips

Learn the ladder at 1 day, 3 months, 6 months and 12 months for both individuals and companies. These figures are not in the tax tables.
In a Section C answer, show each penalty on its own line with the rule. This earns method marks even if one figure slips.
Read the question for the actual filing date and the tax due. Do not use the wrong measure of tax.
Objective test questions are marked all or nothing, so check whether the taxpayer is an individual or a company before you calculate.
If asked to distinguish filing from payment penalties, say that filing penalties depend on the return date and payment penalties depend on the payment date.
Read whether the question asks for interest, penalties or both, and show each on its own line.
Write the three penalty dates in your working before you calculate. It shows the marker your method.
Use the rates in the tax tables given in the exam. You do not need to memorise 8.50% and 3.50%, but you must pick the correct one.