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Points part of HMRC penalty system to expire

HMRC has announced that after a prescribed period of compliance penalty points will expire.

The new penalty points system is part of the Making Tax Digital (MTD) initiative. Under the new penalty scheme, points will be issued every time a customer fails to submit details to HMRC on time. Further points would be issued for every failure thereafter.

These penalty points will expire after a certain period of good compliance. This change to the way the new system will work has been included following a period of consultation with tax payers.

It will now be possible for an organisation, or individual, to reach the point where they have zero penalty points. The time period of compliance required for points to expire varies.

Those who make annual submissions need to comply for two years before their points expire. Whereas, those who are required to fill out quarterly returns need to comply for four submissions to have their points expire. This means they can clear their points after just a year.

This change has been largely welcomed by those involved in the financial sector. The Tax Policy Director of CIOT, John Cullinane said:

“The original proposals with their lack of a shelf-life for points would likely have been ineffective as well as unfair because there would have been little incentive to improve one’s behaviour if points stuck with you for too long regardless of your ongoing compliance.”

Accountants from Spital to London are busy working through the implications of this and other changes to the way the tax system works. The first MTD intake is not due until 2019. However, accountancy firms are already changing the way they work, so they will be ready for the new processes.

Posted by Louise
December 20, 2017

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