Finance Act 1994

194Surcharges on unpaid income tax and capital gains tax

After section 59B of the Management Act there shall be inserted the following section—

“59CSurcharges on unpaid income tax and capital gains tax

(1)This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with section 55 or 59B of this Act.

(2)Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent. of the unpaid tax.

(3)Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent. of the unpaid tax.

(4)Where the taxpayer has incurred a penalty under section 7, 93(5) or 95 of this Act, no part of the tax by reference to which that penalty was determined shall be regarded as unpaid for the purposes of subsection (2) or (3) above.

(5)An officer of the Board may impose a surcharge under subsection (2) or (3) above; and notice of the imposition of such a surcharge—

(a)shall be served on the taxpayer, and

(b)shall state the day on which it is issued and the time within which an appeal against the imposition of the surcharge may be brought.

(6)A surcharge imposed under subsection (2) or (3) above shall carry interest at the rate applicable under section 178 of the [1989 c. 26.] Finance Act 1989 from the end of the period of 30 days beginning with the day on which the surcharge is imposed until payment.

(7)An appeal may be brought against the imposition of a surcharge under subsection (2) or (3) above within the period of 30 days beginning with the date on which the surcharge is imposed.

(8)Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (7) above as they have effect in relation to an appeal against an assessment to tax.

(9)On an appeal under subsection (7) above section 50(6) to (8) of this Act shall not apply but the Commissioners may—

(a)if it appears to them that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax, set aside the imposition of the surcharge; or

(b)if it does not so appear to them, confirm the imposition of the surcharge.

(10)Inability to pay the tax shall not be regarded as a reasonable excuse for the purposes of subsection (9) above.

(11)The Board may in their discretion—

(a)mitigate any surcharge under subsection (2) or (3) above, or

(b)stay or compound any proceedings for the recovery of any such surcharge,

and may also, after judgment, further mitigate or entirely remit the surcharge.

(12)In this section—

• “the due date”, in relation to any tax, means the date on which the tax becomes due and payable;

• “the period of default”, in relation to any tax which remained unpaid after the due date, means the period beginning with that date and ending with the day before that on which the tax was paid.”