HMRC Announce Penalty Changes

Late submission

This measure introduces a new points-based penalty regime for regular tax return submission obligations, which replaces existing penalties for VAT and Self-assessment.

Late payment

There is no late payment penalty if the taxpayer pays the tax late but within 15 days of the due date.

The first penalty is set at 2% of the outstanding amount if they pay between 16 days and 30 days after the due date.

If there is any tax left unpaid 30 days after the due date it is set at 2% of the outstanding amount at day 15 plus 2% of the outstanding amount at day 30. In most instances this will amount to a 4% charge at day 30.

A second late payment penalty is charged at a rate of 4% per annum, calculated on a daily basis on the total unpaid tax incurred from day 31.

To avoid a penalty or penalties, the taxpayer will need to either pay or approach HMRC to agree a ‘time to pay’ arrangement.

Interest harmonisation

The VAT interest rules will change and will be similar to those that currently exist in self-assessment. The measure will make the following changes to interest payments in VAT:

• when an amount is not paid by the due date, late payment interest will be charged to the taxpayer from the date that payment was due, until the date the payment is received
• HMRC will pay repayment interest on either any overpaid tax or tax refunds (or both) due to be repaid

You can read more about this change in policy on the HMRC website here https://www.gov.uk/government/publications/interest-harmonisation-and-penalties-for-late-submission-and-late-payment-of-tax/interest-harmonisation-and-penalties-for-late-payment-and-late-submission