Background Note
9.In many of the taxes administered by HMRC, failure to make a payment in full by the date it is due can result in the taxpayer becoming liable to a late payment penalty or surcharge. This is to encourage taxpayers to fulfil their obligations and to reassure those who pay on time that they are not disadvantaged by those who do not. The way in which such penalties and surcharges work varies for different taxes.
10.In the Pre-Budget Report of November 2008, a new Business Support Package was announced. As part of this package, it was announced that HMRC would not impose penalties or surcharges for late payments of tax in cases where the taxpayer approached them to discuss payment problems before the penalty or surcharge became due and an agreement to defer payment was reached.
11.HMRC have operated this system since November 2008 using their administrative powers. This section is intended to remove liability for penalties and surcharges for late payment of taxes when the taxpayer makes representations to HMRC to pay the tax over an extended period. These representations must be made before the penalty or surcharge becomes due and an agreement to pay over time must be reached.
12.If the taxpayer enters into an agreement to defer payment of an amount of tax, but then does not meet all of the terms of the agreement or make all of the agreed payments, the section permits HMRC to impose the penalty suspended under the arrangement, at their discretion.
13.The section is effective for tax deferral agreements reached on or after 24 November 2008.
