The government still has a new points based system of fines under review. It has been suggested in order to both streamline the system and make it somewhat fairer.
HMRC intend it to be similar to the system of points used to penalise drivers, with self assessment fines only issued after the accumulation of a particular number of points.
In its Technical note on late submission penalties Guidance document, HMRC says it wants “to encourage compliance with regular tax return submission obligations but does not want to punish taxpayers who make occasional mistakes.
This new self assessment points-based late submission penalty regime is designed to be proportionate, penalising only the small minority who persistently fall foul of the rules.”
How will the new HMRC penalty system work?
At the moment, the new system will only apply to SA taxpayers filing on a monthly, quarterly or annual basis. One off returns will remain under the current system. Every time you miss a filing deadline, HMRC will issue one point. It is their responsibility to tell you this. Once you reach a particular number of points, you will be liable for a financial penalty.
The number of points you need to accumulate before you get a fine is dependent on how frequently you are expected to file that return.
- 2 points: annual return
- 4 points: quarterly return
- 5 points: monthly return
For example, you miss five monthly returns, you accumulate five points and are liable to pay a penalty.
The quarterly returns include any that become part of the Making Tax Digital system. Separate businesses and different returns will all accumulate their own points, if you have missed multiple deadlines.
Do I keep the tax points for life?
No, the government plan to build in a way to reset your points total to zero, after you have achieved 24 months of “good compliance”. That means, submitting the returns for which you missed the original deadlines, making sure all others are in, and tax bills are paid on time for 24 months.
What rules do HMRC have to follow?
HMRC have set itself strict deadlines for informing taxpayers when points have been issues and when penalties are due. These deadlines also relate to the frequency of filing of the tax return that is late.
- Annual return: HMRC must tell you within one year
- Quarterly return: within three months
- Monthly return: within on month
These time limits are measured form the month after the deadline is missed. So, if you miss the January self assessment deadline, they measure their 12 months from the February.
Taxpayers have the right to challenge points, through the tribunal system, in the same way as they currently can with disputed penalties.
Hopefully, this will meet HMRC’s aims, as laid out in the Introduction of ‘Making Tax Digital – sanctions for late submission and late payment’:
“Previous consultation has identified that a good penalty regime should take a consistent and standardised approach. Simplifying and harmonising late submission penalties, late payment penalties and interest will make the tax administration system clearer and simpler for our customers, ensuring that it is as easy as possible for them to comply with their obligations across taxes. It will also be easier for HMRC to operate penalties consistently.”
Anything that simplifies tax administration is good for everybody involved and it completely removes that automatic £100 late penalty.
