The government has announced that it intends to take forward the points-based model for late submission penalties.
In its response to the Making Tax Digital consultation, the government explains that it has chosen a points-based model because it ‘achieves the best compromise between fairness and simplicity, whilst also being effective in supporting good compliance and changing behaviour’.
The points-based model is expected to operate in the following way: A customer receives a point every time they fail to provide a submission on time. At a certain threshold (depending on the frequency of their submission obligations) a penalty is charged. Once the threshold is reached a penalty is charged for every subsequent failure to provide a submission on time. The points are reset to zero after a period of good compliance (that is, meeting submission obligations on time), again depending on the frequency of the obligation.
This model is designed to ensure that isolated failures do not attract a penalty and improved reporting behaviour is rewarded. A technical consultation on the draft legislation is planned for summer 2018. Further details of how the penalty system will operate are available in the consultation response.
The government has also published a consultation on simplified interest and late payment penalties. These consultations form part of the government’s work to align and simplify the tax administration framework.
