Response to late MTD payment sanctions
5th July 2017
The Chartered Institute of Taxation (CIOT) is calling on HMRC to allow taxpayers a limited number of defaults before incurring a late payment penalty under Making Tax Digital (MTD).
Most businesses, self-employed people and landlords will be required to use digital accounting software to keep and file tax records on a quarterly basis from next year.
The new system is set to roll out from April 2018 for those with an annual turnover exceeding the VAT threshold (£85,000).
Businesses with annual turnover below this threshold are exempt until April 2019, while those with a turnover of £10,000 or below are exempt from the changes.
In a consultation, HMRC set out 3 possible models to penalise late payments and submissions. It intends to implement 1 of the following models:
- Model A – points-based system where the individual would incur a penalty when a certain points threshold is reached
- Model B – automated review system looking over someone’s compliance with their submission obligations after a set period of time
- Model C – suspension of penalties where someone can avoid having to pay a penalty by provide a late submission.
In response, the CIOT said Model C is a “proportionate response” to late filing and is more likely to penalise non-compliance.
Adrian Rudd, spokesperson at CIOT, said:
“The suspension model most closely complies with HMRC’s penalty principles, which include that penalty regimes should be designed from the taxpayers’ perspective, primarily to encourage compliance and prevent non-compliance, and that penalties are not to be applied or seen to apply with the aim of raising money.”
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