Points mean penalties in HM Revenue & Customs late filing reforms

A shake-up of penalties for late submissions and payments under the Government’s Making Tax Digital (MTD) programme is to see a points-based system introduced, HM Revenue & Customs (HMRC) has confirmed.

The new system is set to be introduced in tandem with the launch of MTD for VAT in 2019 and will see taxpayers receiving a point each time they file or pay after a deadline.

Taxpayers who then exceed a penalty threshold will be fined and will receive further fines each time they subsequently miss a deadline. After a period of meeting deadlines on time, the points total will reset to zero.

HMRC has proposed the following penalty thresholds:

Submission frequency       Penalty threshold

Annual                                     2 points

Quarterly                                 4 points

Monthly                                   5 points

Meanwhile, it has proposed the following good compliance periods, in which taxpayers who have exceeded the above thresholds would need to meet every deadline in order to see their points totals reset to zero:

Submission frequency      Good compliance period

Annual                                     2 submissions

Quarterly                                 4 submissions

Monthly                                   6 submissions

The move is intended to penalise those who repeatedly miss deadlines while offering leniency in respect of one-off late filings or payments and encouraging improvement from those who have repeatedly missed deadlines. 

Full details of the scheme are to be included in draft legislation, which is expected to be published this summer before being put out for consultation.

Link: Making Tax Digital – sanctions for late submission and late payment