The World Cup might be over, but this week I still want to talk about penalties.
In this case, it’s the penalties that HMRC apply if you file a tax return late. Last week they proposed a whole new way of doing this in the future. It will apply to Self-Assessment Tax Returns, VAT returns, PAYE, and Corporation Tax returns.
And, overall, it could be good news.
HMRC are recognising the fact that, every now and then, you might late as a one-off. And, if it is a one-off, you don’t deserve to be fined.
At the moment, the fines can be quite large. For example, if your Self-Assessment Tax Return is just one minute late, you get fined £100. If it’s three months late, you start getting charged £10 pounds per day as an additional fine. So it really can rack up.
The new system will actually allow you, every now and then, to make a little mistake without being fined. Repeat offenders will still be fined.
How will the new system work?
At its simplest, they’re bringing in a penalty system where you get points for each time you’re late. When you reach a threshold, you get fined.
The thresholds are as follows:
- Annual tax returns, for example SATRs – you can get two points, which equals two failures before you get fined.
- Quarterly returns, for example VAT returns – you’re allowed four points/late submissions before you get fined.
- Monthly returns, eg PAYE – it’s five points or five offenses before you get fined.
The points stay on your account for two years before expiring. So, if you can keep your nose clean for 24 months, you get all your penalty points knocked off and you’re back to zero.
It’s a bit like having points on your driving licence for speeding.
Overall, this does actually appear to be quite a good idea and the system could be introduced next year. We’ll keep you updated on what happens.
And, of course, we’ll continue to make sure you don’t miss any deadlines in the first place!
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