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Penalty Loophole

22 May 2002 / Keith M Gordon
Issue: 3858 / Categories: Comment & Analysis

KEITH GORDON MA, ACA, ATII investigates a quirk in the rules relating to corporation tax self-assessment penalties

THE FIXED PENALTY régime under corporation tax self assessment was the subject of a Loose End written by me in Taxation 17 January 2002. The editor has invited me to write a follow-up article because of the feedback received from a number of readers.

Penalty provisions

Like pay and file the corporation tax self-assessment régime includes £100 fixed penalties for returns that are submitted late (paragraph 17(2)(a) of Schedule 18 to the Finance Act 1998). The penalty increases to £200 if the return is more than three months late (paragraph 17(2)(b)). Unlike the equivalent provisions for income and capital gains tax self assessment the penalty is not reduced in cases where the actual tax payable is less than the penalty (see section 93(7) Taxes Management Act 1970).

It must also be remembered that a penalty arises under the corporation tax...

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