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In addition to a brand new, digitised tax system, Making Tax Digital Making Tax Digitalfor VAT may even see the introduction of two new HMRC penalty regimes for late submissions and late funds, which can subsequently apply to Revenue Tax Self Evaluation.
So long as you proceed to be diligent about deadlines, there’s nothing to fret about – HMRC’s new strategy is designed to be fairer and fewer extreme, which it hopes will promote extra well timed submissions, leading to fewer penalties.
This text will clarify how the brand new programs work, once they come into drive, and what your obligations are.
When do the HMRC penalty programs come into drive?
The brand new penalty programs will apply to any VAT submissions for tax durations beginning on or after 1 January 2023.
They had been initially scheduled to be launched alongside the complete rollout of MTD for VAT this April, however had been pushed again by 9 months as a result of deficiencies in HMRC’s IT system.
The brand new programs may even apply to Revenue Tax and Self Evaluation (ITSA) and might be launched on 6 April 2024 for ITSA prospects who’re mandated for MTD and 6 April 2025 for all different ITSA prospects.
What’s the new HMRC penalty system?
The brand new penalties for late submission might be utilized to you for those who fail to satisfy your obligations to make submissions to HMRC on time.
As an alternative of receiving an automated penalty from HMRC for each late submission, you’ll incur quite a lot of factors every time you miss a deadline, and solely be penalised for those who hit a sure threshold.
How do the late submissions penalties work?
You’ll rack up factors for each missed submission deadline, and be charged a monetary penalty of £200 if you attain a sure threshold.
The thresholds, that are decided by how typically you’re required to make a submission to HMRC, are as follows:
- Annual – 2 factors
- Quarterly (together with MTD for ITSA) – 4 factors
- Month-to-month – 5 factors
Crucially, you’ll have totally different factors totals for MTD for VAT and ITSA. So for those who attain the factors threshold for late VAT returns and subsequently for Revenue Tax, you’ll be charged two separate £200 penalties.
Typically, to make compliance simpler, even when you’ve got two or extra failures referring to the identical submission obligation in the identical month, you’ll solely incur a single level.
Nonetheless, this rule is not going to apply throughout a number of MTD for ITSA submission obligations. For instance, in case your common quarterly submission deadline, Finish of Interval Assertion (EOPS) deadline, and ultimate declaration fall in the identical month, and also you missed all three, you’d incur three penalty factors.
You probably have a number of companies and are required to submit separate common ITSA updates for every one, you’ll have one factors tally that may cowl all your enterprise obligations beneath ITSA.
Do the penalty factors expire?
Every penalty level lasts for 2 years earlier than expiry. The lifetime of a degree begins the month after the month by which it was incurred.
Nonetheless, for those who’re on the penalty threshold, your factors is not going to expire.
You possibly can actively reset your factors by assembly two situations. You are able to do this for particular person factors or for a number of factors. In case you are on the factors threshold, that is the one approach you’ll be able to reset your factors again to zero.
With a view to reset your factors to zero, you have to:
- Situation A: Meet all submission obligations for a interval of compliance dependent in your submission frequency – 24 months for annual, 12 months for quarterly, and 6 months for month-to-month submissions
- Situation B: Have submitted all submissions due inside the previous 24 months, whether or not they had been initially late or not
What are the brand new late fee penalties?
In addition to the brand new late submission penalty system, HMRC has additionally launched a brand new late funds penalty system, which is robotically utilized for those who fail to pay on time.
It operates on the next timeframes:
- As much as 15 days overdue: no penalty
- As much as 30 days overdue: 2% of the quantity on high of the fee due
- Day 31 overdue: 2% of what was due on day 15, plus 2% of what was due on day 30
- Greater than 31 days overdue: first penalty calculated at 2% of what was due on day 15 plus 2% of what was due on day 30 and a second penalty calculated at an annual fee of 4% of the excellent quantity, utilized every day
As with different HMRC penalty programs, variable rate of interest based mostly on the Financial institution of England base fee can also be utilized.
Can I problem a penalty?
Sure, for those who suppose you’ve got an inexpensive excuse for lacking a deadline, you’ll be able to problem a penalty or level. You may make your case by the inner HMRC assessment course of. In case you don’t agree with the result, you’ll be able to enchantment to the First Tier Tax Tribunal.
What subsequent?
So long as you do every thing you’ll be able to to satisfy your submission obligations and make funds on time, you don’t have anything to fret about from the brand new penalty programs.
The very best factor you are able to do to keep away from fines is to get your enterprise processes prepared for MTD. Discover out extra about the way to put together on Sage’s Making Tax Digital hub.
This text was written as a part of a paid-for content material marketing campaign with Sage
Learn extra: Methods to use MTD to get VAT proper
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