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UK Accountants Suggest Simpler Making Tax Digital Penalties

by Jason Gorringe, Tax-News.com, London

13 March 2018


In its response to HM Revenue and Customs's consultation on the penalties regime for its Making Tax Digital project, the Association of Taxation Technicians has suggested a simpler and more understandable regime.

Under MTD, from April 1, 2019, businesses with a turnover above the VAT threshold (currently GBP85,000, or about USD112,500) will have to: keep their records digitally (for VAT purposes only), and provide their VAT return information to HM Revenue and Customs (HMRC) through MTD-compatible software. MTD will be available on a voluntary basis to other businesses, for both VAT and income tax.

As part of the Government's reform of tax administration penalties, HMRC has set out proposals for a revised penalty regime for late payment of tax, which will apply across a wide range of taxes. The novel feature of HMRC's proposals is the introduction of a new penalty where the delay in paying a tax liability is of between 16 and 30 days. Existing penalty provisions do not currently apply until the delay exceeds 30 days.

Under the proposal, tax paid (or made the subject of a Time to Pay (TTP) arrangement) in the first 15 days after the due date of payment would incur no penalty. However, tax paid or made the subject of a TTP arrangement in the 16- to 30-day period would incur a penalty calculated as 2.5 percent of the tax being paid late.

In its response to the consultation, the ATT suggested that it would be a lot simpler and more understandable for the penalty rate of interest to accrue immediately from the due date but with the important provision that it would be cancelled if payment or a TTP arrangement is made within the first 15 days from the due date. This offers, in effect, a carrot for making payment or initiating a TTP arrangement in the first 15 days, rather than a stick for failing to do so, it said.

TAGS: tax | business | value added tax (VAT) | interest | United Kingdom | HM Revenue and Customs (HMRC) | penalties | HM Revenue and Customs (HMRC) | Tax

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