Tax & admin · 12 July 2018

HMRC’s new late submission penalty point model lands mixed response

Making Tax Digital
The switch to a fully digitised tax system has been pushed back until at least 2020

Tax campaigners have broadly welcomed HMRC’s proposed reforms to late submissions penalties, but warned of potential confusion among taxpayers.

In new draft legislation ahead of Making Tax Digital, HMRC has put forward a “penalty point” model for self-assessment tax returns submitted after the deadline.

Penalty point model

Under the new plans, taxpayers would receive a point for every missed deadline, at a certain threshold dictated by the frequency of their submission obligations.

Penalty thresholds

Annual submissions: 2 points

Quarterly submissions: 4 points

Monthly submissions: 5 points

After the threshold has been reached, HMRC will charge a penalty for each missed submission.

A period of good compliance will see penalty points erased by HMRC.

Good compliance

Annual submissions: 2 submissions

Quarterly submissions: 4 submissions

Monthly submissions: 6 submissions

Both penalty points and fines are appealable, giving taxpayers an opportunity to submit reasonable excuses for missed deadlines.

In response to HMRC’s proposals, the Low Incomes Tax Reform Group (LITRG) claimed the model would be easy for taxpayers to understand.

Commenting on the way the points model had been developed, Joanne Walker, LITRG technical officer, welcomed the open approach adopted by HMRC.

“HMRC have consulted on many aspects of the penalty regime in recent years, particularly with a view to ensuring that it is fit for purpose for Making Tax Digital,” Walker said.

“This is welcome, as is the fact that a number of LITRG concerns have been taken on board.”

“We are pleased that a penalty point model has been adopted for late submission of returns, as in general, we think this should be easy for taxpayers to understand.”

However, Walker added that the introduction of a 15-day period in which a reduced penalty might apply could lead to confusion.

Making Tax Digital


HMRC urged to delay Making Tax Digital amid “alarming” new findings

From April 2019, all VAT-registered businesses will have to maintain and submit all VAT records digitally


LITRG has subsequently proposed a “straightforward” 30-day period for payment, which, it claimed, would be both fairer and simpler to understand

She added: “There are aspects of the regime that may prove complex to administer and explain to taxpayers however, since there are three sets of rules for the application of points, which are largely determined by the frequency of tax returns required.

“The inclusion of key safeguards, such as a provision for HMRC to allow for familiarisation periods, provisions for the expiry of old points and reasonable excuse are essential for the protection of taxpayers.

“It is now essential that clear and comprehensible guidance is made available to taxpayers to ensure that they can adapt to and understand these new penalties.”

Experts expect HMRC’s penalty points model to commence from April 2020, 12 months ahead of the full introduction of Making Tax Digital.

LITRG has published its responses to HMRC’s late submission proposals in full

Sign up to our newsletter to get the latest from Business Advice.



Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.