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HMRC's consultation, ‘Making Tax Digital sanctions for late submission and late payment' closed on 11 June 2017. Responses are anticipated shortly.

The condoc follows a consultation last year and proposes a new penalty and interest framework to deal with taxpayers' new multiple reporting obligations under its Making Tax Digital (MTD) proposals.

All taxpayers who are subject to MTD will have to file at least four extra returns per year. The current late filing penalty regime deals with annual penalties e.g. under Self Assessment, quarterly penalties for VAT and monthly penalties for pay-as-you-earn (PAYE) Real-time Information (RTI) and Construction Industry Schemes (CIS).

HMRC consulted on various complex penalty models in 2016 and this latest consultation considers three options:

Late payment penalty interest

Late payment penalty interest would replace the current systems of late payment penalties and surcharges. This would be charged according to the number of days late at a fixed percentage rate.

Safeguards

All the models will only apply where a customer has failed to meet an obligation and does not have a reasonable excuse for doing so. There will be a right of appeal against all penalties and the recording of failures that do not, immediately, give rise to a penalty e.g. failures that cause the issue of points or that are taken into consideration at the time of the review of compliance.

The penalty options

1. A points-based system

A period of good compliance required to reset the points total to zero would be: 

Submission frequency Good compliance period
Annual 2 return deadlines
Quarterly/MTD for business 4 submissions
Monthly 6 submissions

 

2, Periodic, automated review, tax by tax, considering duration of failures

The review could be made:

Suspension

Late payment penalty interest

Summary of Consultation Questions

Question 2.1 Which of the three penalty models proposed (A - Points-based, B - Regular review of compliance, or C – Suspension of penalties) do you consider to be the best and why? 

Question 2.2 What are your views on the relative importance of the competing demands of fairness, simplicity and effectiveness? 

Question 2.3 To what extent does each of the three penalty models strike an appropriate balance between fairness, simplicity and effectiveness? 

Question 3.1 Do you agree with these proposals for the duration of the required good compliance periods?  

Question 3.2 Could any changes be made to the points-based penalty model to make it fairer, simpler or more effective?

Question 4.1 What are your views on the timing of the review?   

Question 4.2 Which of the three options mentioned in paragraphs 4.5 to 4.7 above for customers within Making Tax Digital for Business do you think is the most appropriate?      

Question 4.3 Do you agree this would be a proportionate response to occasional lateness that lasted just a short time?   

Question 4.4 Could any changes be made to the regular review of the compliance model to make it fairer, simpler or more effective?  

Question 5.1 Do you agree that improved compliance should be recognised? Is there a better alternative for recognising it?   

Question 5.2 Could any changes be made to the suspension model to make it fairer, simpler or more effective?

 Responses this consultation should be sent by 11 June 2017, by e-mail to This email address is being protected from spambots. You need JavaScript enabled to view it. 

or by post to: 

HM Revenue and Customs Making Tax Digital Tax Administration Room 1C/06 100 Parliament Street London SW1A 2BQ