Autumn Budget 2017: Simplifying late submission and late payment sanctions.

In March this year HMRC launched a consultation focused on sanctions for late submission penalties and late payment, as part of its wider preparations for the rollout of Making Tax Digital. The aim is to introduce a penalty model which is based around proportionality, fairness, consistency and threat. HMRC has stated it is not looking to raise additional revenue from the sanctions, but it does want to see good taxpayer behaviour rewarded and a credible threat to be enforced on poor behaviour from non-compliant taxpayers.

Three different late submission models were contained in the consultation, featuring a points based penalty proposal, a regular review of compliance option and a suspension of penalty model.

The consultation element on late payment and potential interest, whilst expressing the same desire for fairness and proportionality, was less detailed but raised the possibility of HMRC charging penalty interest in addition to late payment interest.

The Government is intending to move forward with the points based penalty proposal which, in simple terms, could operate in a similar way to driving offences. Points would be accumulated up to a maximum before a penalty is triggered, but sustained good behaviour would see points drop off. A period of 24 months has been floated by HMRC as a suitable period to measure good behaviour, before the points total would be reset to zero.

However, a response document to the consultation is to be published on 1 December 2017 and a further consultation launched.

With Making Tax Digital for income tax and corporation tax put back until 2020 at the earliest, any enforcement of new sanctions may appear far off, but the Government is intending to put forward draft legislation next summer.