06/12/2017
Making tax digital – linking late payment penalties with interest (UK)
A points-based model to calculate the penalty for non-deliberate failures to meet regular submission obligations in income tax self assessment, corporation tax and Vat will be incorporated with an ‘interest’ type calculation in a hybrid model proposed by HM Revenue & Customs as the basis of its planned approach to a new late submission penalty regime.
In addition to a summary of feedback to the March consultation, which informed the selection of the points-based model from three options put forward by HMRC, ‘Making Tax Digital: sanctions for late submission and late payment’
- sets out further details of the selected model, which will be subject to a new technical consultation
- links to a new consultation** combining simplified interest and late payment penalties in a coherent package
Together, the two consultations will form part of the government’s work to align and simplify the tax administration framework, with a consultation on draft legislation planned in summer 2018.
A key feature of the points-based model is that it will apply for each tax, rather than across the three taxes as originally proposed. A point will be incurred each time a taxpayer fails to provide a submission on time and a penalty will be charged after the points reach a certain threshold. They will then be re-set to zero after the taxpayer achieves a period of good compliance.
** ‘Making Tax Digital: interest harmonisation and sanctions for late payment’ presents options for aligning rules and rates for interest across the 3 main taxes and explaining how late payment penalties could interact with interest.
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