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Points-based model to equal fines

14 December 2017

HMRC has revealed details of a penalties system for late submissions and payments under Making Tax Digital. Under the model ‘customers’ will receive a point every time they fail to submit on time. A penalty will then be charged at a certain threshold, which will be dependent on the frequency of their submission obligations. After the threshold has been reached a penalty will be charged for every subsequent submission failure.
The penalty thresholds put forward are: 2 points fort annual submissions, 4 points for quarterly submissions and 5 points for monthly submissions.

Penalty point will, however, have a shelf life and will expire after a period of good compliance. HMRC said the periods of good compliance will be 2 submissions for annual submissions, 4 for quarterly and 6 for monthly.

The system will also work on a separate points total per tax.
Draft legislation is expected in the summer of 2018.

PKF Francis Clark’s, Martin Atkins, said: “Despite the analogies with traffic PCN’s, this announcement is actually to be welcomed. The original proposals with their lack of a shelf-life for points would have been ineffective as well as unfair because there would have been no incentive to improve if points stuck for too long regardless of ongoing compliance.”

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