United Kingdom: Changes to SDRT penalties for late returns and late payment
Effective
1 January 2015
Clearstream Banking1 customers are advised of the changes to be noted in the United Kingdom (UK) on penalties for late returns and late payments on CREST and "off market" trades2 subject to Stamp Duty Reserve Tax (SDRT).
Customers that are deemed to file their SDRT return or other documents by the filing date and fail to do so become liable to a penalty from HM Revenue and Customs (HMRC).
Background
The Finance Act 2009 (FA 2009) introduced a series of cross-tax models for late-return and late-payment SDRT penalties, together with a simplified and aligned model for charging and paying interest. HMRC set out a phased timetable for implementing the new penalty provisions, with legislation designed to be enabled for different taxes by way of Appointed Day Orders (ADOs). The penalty provisions of FA 2009 Schedule 55, (failure to make returns etc.) and Schedule 56 (failure to make payment on time etc.) applied for SDRT from 1 January 2015.
Impact on customers
Customers failing to file the relevant documents to HMRC by the filing date may be subject to the following penalties:
Penalties for a late return (from 1 January 2015)
| When the penalty first becomes due: | Payment Due: |
| Penalty date | GBP 100 |
| + 6 months | GBP 300 or 5% of the undeclared tax, whichever is greater. This is in addition to the initial GBP 100 penalty. |
| +12 months | GBP 300 or 5% of the undeclared tax, whichever is greater. |
If HMRC become aware of a transaction that should have been notified they will also charge additional daily penalties of GBP 10 per day if any failure to notify a chargeable transaction continues for more than three months and up to six months.
The amount of charges 12 months after the penalty date depends upon the reason information affecting HMRC’s ability to assess the person’s correct liability was withheld. Where HMRC do not know the reason HMRC may charge the minimum penalty of 5% of the unpaid tax or GBP 300; this may be increased if the information was withheld deliberately as follows:
- If withholding of information is deliberate but not concealed:
- Between 20% and 70% of the undeclared tax , or GBP 300 whichever is greater; or
- If withholding of information is deliberate and concealed:
- Between 30% and 100% of the undeclared tax, or GBP 300 whichever is greater.
Note: The penalty date is the day after the filing date. Further penalties will be incurred at three, six and 12 month intervals from the penalty date. Charges cannot be issued retrospectively.
The amount of the penalty can also vary after 12 months from the penalty date, depending on the reason for the failure and whether the information would enable or assist HMRC assessing the person’s correct tax liability.
Penalties for missing the payment deadline
(For transactions with a payment deadline on or after 1 January 2015)
| When the penalty first becomes due: | Payment Due: |
| 31 days after the due date for payment | 5% of the unpaid tax |
| Five months after the penalty date3 | A further 5% of the unpaid tax |
| 11 months after the penalty date4 | A further 5% of the unpaid tax |
Transitional period
The old legislation could still apply to individual transactions, any notifications and/or payments that should have been made by 31 December 2014, but received after 1 January 2015. They may be subject to the previous penalty provisions under Section 93, Taxes Management Act 1970.
Further information
For further information, customers may contact Clearstream Banking Client Services, their Relationship Officer or visit the HMRC website.
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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.
2. Off market trades are transactions on securities, including shares, that are transferred outside CREST and are held by a nominee.
3. For example, five months and 31 days after the due date for payment.
4. For example, 11 months and 31days after the due date for payment.