At present, the penalties for a late tax return can amount to £1,600… even if you were initially due a repayment of tax but had not submitted the return on time.
However, there are plans to change the current system away from the fixed fines and instead adopt a penalty-point system instead.
The new system will apply to normal returns, such as the annual tax return or making tax digital quarterly updates.
Points will be received for each failure to comply with the submission time limits. Then, once a certain points level is reached, a fine will be charged.
These are intended to be:
Annual return – 2 point limit
Quarterly return – 4 point limit
There is also a monthly limit for incurring points of 1 per month, where they are related to the same filing obligation.
Points are planned to expire two years from the month after they are incurred. Points can also expire earlier for ‘good behaviour’ by submitting 4 quarterly submissions on time.
Points are incurred separately for individual taxes. If separate returns are submitted for individual businesses, then each will have their own total.
HMRC has a limited time to raise a penalty point, this is 12 months for an annual return or 3 months for a quarterly return.
It is also possible to appeal against penalty points, and HMRC also has some discretionary powers to not apply a penalty point in specific circumstances.
There will be a familiarisation grace period if HMRC introduces new or amended return obligations.
The exact details and implementation are to be confirmed by HMRC in due course – perhaps with the next budget.