Income Tax (Earnings and Pensions) Act 2003 Schedule 3 paragraph 40C

Penalties for failure to deliver annual returns

Section 40C sets out the escalating penalty regime that applies when a scheme organiser fails to submit the required annual return (with all necessary information and declarations) by the specified deadline.

• An initial penalty of £100 applies immediately upon missing the filing deadline, rising by £300 at three months and a further £300 at six months of continued non-compliance
• After nine months, HMRC may impose daily penalties of £10 for each day the failure continues, with the possibility of multiple daily penalty notices
• A scheme organiser can avoid penalties by demonstrating a reasonable excuse to HMRC or, on appeal, to the tribunal
• Lack of funds and reliance on third parties are generally not accepted as reasonable excuses unless the scheme organiser can show the situation was beyond their control or that they took reasonable care