Budget2017_Autumn_budget_late_returns

Press release: ATT calls for consultation on design of new penalty system for late returns

22 November, 2017

The Association of Taxation Technicians (ATT) is concerned that the Government’s decision (included in the Budget papers)1 to move to a points based penalty system for late or missing tax returns without further consultation could result in unintended consequences.

The Government’s announcement follows a consultation earlier in the year2 when HMRC outlined three alternative proposals for a penalty system that will apply in relation to both annual tax returns and quarterly returns within Making Tax Digital (MTD).

Now that the Government has decided which of the three alternatives to pursue, the ATT considers that there should be consultation on the detail in order to ensure that the new penalty delivers its intended results.

Yvette Nunn, Co-Chair of ATT’s Technical Steering Group, said:

“We can see that a points based system under which a taxpayer’s recent compliance history is considered before HMRC impose a penalty for delayed submission of a tax return is sensible. However, as we noted in our response to the previous consultation,3 the points system proposed appeared to throw up some anomalies. Under the proposal, it appeared that some persistent defaulters might avoid a penalty while some more compliant taxpayers could incur a penalty.

“The arrival of MTD for VAT in April 2019 with its requirement for quarterly returns makes it essential that the points based penalty system has been properly thought through. That needs consultation with businesses and agent representatives to ensure a smooth launch.  

“There is too much risk of the system producing unintended consequences if it has not been properly considered. The introduction of MTD involves massive changes for business in their record keeping and reporting to HMRC. The new penalty system has a key role in ensuring the success of MTD.”

Notes for editors

  1. See Red Book section 3.84.
  2. See Making Tax Digital: sanctions for late submission and late payment.
  3. See link here.