Making Tax Digital: Consultation period on penalties for late online submissions and the payment of tax
In the Budget proposals for 2015, the government set out their plans for a modernised tax system and the end of filing tax returns each year. At that time the government announced it would improve the service it provides to tax payers through a £1.3 billion investment which would eventually transform HMRC into one of the most digitally advanced tax administrations in the world.
Making Tax Digital is a vision to make tax administration more effective, more efficient and easier for taxpayers, through the implementation of a fully digital tax system.
A pilot scheme is underway to implement Making Tax Digital and the Revenue is seeking responses to its proposals for a new penalty regime for non-deliberate failures to meet regular submissions in a timely manner.
The new proposals are:
- Review, or
According to HMRC, the aim under Making Tax Digital is to manage the taxpayer’s compliance for income tax, corporation tax and regular VAT submissions together. However, they may need to consider the implementation of these changes for monthly or annual filings as it expected that quarterly submissions will required under Making Tax Digital.
The proposals outlined so far are:
The model proposed in the previous consultation has been amended to apply to each tax rather than across all taxes. A taxpayer would receive a point each time they failed to provide a submission on time. When the points reach an agreed threshold, a penalty would be charged.
The points are reset after a period of compliance that indicates that the taxpayer has met their obligations.
A Regular Review of Compliance
HMRC would carry out an automated regular review of the taxpayer’s compliance with regard to their submission obligations over a set period. There would be no penalty for the first failure.
Further defaults would give rise to penalties based on the number failures.
HMRC would not charge a penalty immediately but suspend it on condition that the taxpayer provides the outstanding submission within a specified time.
Suspension could be applied more than once but this may limited.
HMRC is also considering changes to charging penalty interest which would replace the default surcharge and all late payment penalties that currently operate for income tax, corporation tax and VAT.
It is likely that this would later be extended to all taxes and duties. It would apply to taxpayers who miss their due dates and have not adhered to time-to pay arrangements for example. The costs would be in addition to late payment interest.
There is a lot to consider under Making Tax Digital but our aim is to simplify things for you as much as possible.
If you need advice regarding any tax related issues, please contact us on 01865 244661.