ACCA Applied Skills · Taxation (UK)
Penalties for Non-Compliance in ACCA TX (UK)
Penalties for non-compliance are the charges HMRC applies when a taxpayer files late, pays late, submits wrong figures or keeps poor records. To solve questions, identify the tax, the type of default and the time late or the behaviour, then apply the correct rate from the rules or the tax tables ACCA gives.
What this chapter covers
This chapter covers what happens when taxpayers fail to meet their obligations. It has five parts: late filing of returns, late payment of income tax and corporation tax, penalties for errors, VAT late payment penalties, and record keeping. Each part has a trigger (a missed date, a wrong figure, missing records) and a charge.
The chapter sits on top of the rest of the paper. You cannot say a return is late until you know the filing date for income tax, corporation tax or VAT. You cannot calculate a late payment charge until you have the tax due. So it links to the self-assessment, corporation tax and VAT chapters, and it is usually tested as a short add-on within a larger question.
Some figures are given in the Tax Rates and Allowances that ACCA provides in the exam: the VAT late payment penalty bands, the standard error penalty table, and the interest rates on underpaid and overpaid tax. Others you must learn, such as the late filing amounts, the late payment percentages for income tax and the record retention periods. Know which is which.
Penalty questions are short, rule-based and predictable, which makes them some of the easiest marks in TX. They appear in objective questions, where you get all or nothing, and as a part of constructed response questions on individuals, companies or VAT. A student who knows the dates, percentages and error categories can pick up marks quickly. A student who guesses loses them just as quickly. The effort needed is small compared with a full computational topic.
Penalties for non-compliance: topics in the order to study them
- 1Penalties for Late Filing of Tax ReturnsStart here because filing deadlines come first in time and the fixed and tax-geared penalties are the base for everything else.
- 2Late Payment Penalties for Income Tax and Corporation TaxNext, because payment dates follow filing dates, and you must separate the percentage penalties for income tax from the interest-based treatment of corporation tax.
- 3Standard Penalties for ErrorsThis uses the table ACCA provides, so once you know the three behaviours and the disclosure effect, it is a matter of reading the table accurately.
- 4VAT Default Surcharge and Late Payment PenaltiesStudy VAT after the direct taxes so you do not mix up its separate bands and rules with income tax and corporation tax.
- 5Record Keeping Requirements and PenaltiesFinish with this because it is mostly memory work: retention periods by taxpayer type and the penalty for failing to keep records.
How to prepare Penalties for non-compliance
Treat this chapter as a set of rules to learn and then apply under time pressure. Work in short sessions, which suits phone study.
- Build a one-page table for each tax (income tax, corporation tax, VAT) with columns for filing date, payment date, late filing penalty, late payment penalty and records period.
- Learn the figures that ACCA does not give you. Use flash cards for the late filing amounts, the late payment percentages and the retention periods, and test yourself until you are fast.
- Practise reading the tax rates tables: the VAT late payment bands (none up to 15 days late, 3% for 16 to 30 days, 6% plus a daily penalty after that) and the error penalty table with its maximum and minimum percentages.
- For each question, count the days or months late first, then choose the band. Write the dates out. Do not work from memory of the gap.
- Do objective test questions in timed sets. Remember that a wrong answer scores zero, so read every option for the date and the tax type.
- For written answers, set out the penalty by heading: the default, the rule, the calculation, then the total. State the base figure (tax unpaid, or potential lost revenue) clearly so a method mark is available even if a figure is wrong.
- Finish by mixing questions across all five topics, since the exam will not label which penalty applies.
Common mistakes in Penalties for non-compliance
Applying one penalty regime to every tax.
Fix: Name the tax and the type of default at the start of each answer, then use only that regime's rules.
Getting the VAT late payment band wrong by miscounting days.
Fix: Write down the due date and the payment date, count the days, and then match the number to the band in the table.
Calculating the error penalty on the wrong base.
Fix: Work out the potential lost revenue first, which is the tax effect of the error, and then apply the percentage.
Choosing the maximum error penalty when the question gives disclosure details.
Fix: Read the facts for behaviour and for when the taxpayer came forward, then choose the percentage from the right row and column of the table.
Forgetting the figures that are not provided in the exam.
Fix: List which figures you must memorise (late filing amounts, income tax late payment percentages, record retention periods) and revise them daily.
Giving a list of rules with no application in a written answer.
Fix: Use the given dates and figures, show each step, and finish with a clear total penalty and a short conclusion.
Last-day revision: Penalties for non-compliance
- 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.
Penalties for non-compliance practice questions
- Omar's VAT return showed £15,000 less VAT payable than the correct figure because he deliberately falsified purchase invoices and hid the fa…
- Tariq's balancing payment of £6,400 for 2025/26 was due on 31 January 2027. He paid it on 20 February 2027. Which statement is correct?
- A taxpayer who is careless submits an incorrect return and corrects it by prompted disclosure. The potential lost revenue is £10,000. Under …
- Hana has an income tax balancing payment of £20,000 for 2025/26, due on 31 January 2027. She pays £12,000 on 15 February 2027 and the remain…
- Delta Ltd understated its corporation tax by £20,000 through a deliberate error, which it did not conceal. HMRC found the error through a co…
- Hana submitted her tax return and later discovered that a careless error understated her tax by £8,000. She told HMRC about it before HMRC h…
- Priya has an income tax balancing payment of £8,000 for 2025/26 that was due on 31 January 2027. She pays the full amount on 20 March 2027. …
- Which one of the following gives the maximum standard penalty, as a percentage of the potential lost revenue, for a careless error in a tax …
Penalties for non-compliance in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Penalties for non-compliance: frequently asked questions
Which penalty figures are given in the TX-UK exam?
ACCA provides tax rates and allowances, including the VAT late payment bands, the standard penalties for errors table and the interest rates on underpaid and overpaid tax. Other figures, such as late filing amounts and record keeping periods, you need to learn. Check the current examinable documents before your sitting.
How is the error penalty calculated in TX?
The penalty is a percentage of the potential lost revenue. You choose the taxpayer's behaviour (careless, deliberate but not concealed, or deliberate and concealed) and whether disclosure was prompted or unprompted. The table then gives a maximum and a minimum percentage.
How do VAT late payment penalties work?
No penalty applies if payment is up to 15 days late. The penalty is 3% for 16 to 30 days late. For more than 30 days it is 6% plus a daily penalty at an annual rate of 10%. Count the days from the due date carefully.
Is this chapter tested in objective questions or written answers?
Both. Short rule and band questions suit objective test questions, where you score all or nothing. Penalties can also form part of a constructed response question, where you need a clear, laid-out answer with the dates and the calculation shown.