Open consultation

Draft legislation: The Penalties for Failure to Pay Tax (Assessments) Regulations 2024

Summary

We welcome views in this technical consultation for the proposed new Penalties for Failure to Pay Tax (Schedule 26 to the Finance Act 2021) (Assessments) Regulations 2024.

This consultation closes at

Consultation description

These draft regulations relate to the reformed penalty system for late payment of tax, which is set out in Schedule 26 to the Finance Act 2021. Penalty Reform began for VAT taxpayers from 1 January 2023, and from April 2024 for Income Tax Self-Assessment taxpayers who chose to volunteer to test the Making Tax Digital service. For all other Income Tax Self-Assessment taxpayers, Penalty Reform will commence as Making Tax Digital is rolled out, from April 2026 onwards. 

The reformed late payment penalty is proportionate to the length of time the tax is outstanding. The later a taxpayer pays their outstanding tax, the higher the penalty will be.  

Currently, the legislation allows HMRC to assess the second late payment penalty once, when the amount of outstanding tax is paid in full, within a two year assessment time limit. This time limit gives customers certainty about when penalties are charged. 

The draft regulations published here allow HMRC to assess and charge the second late payment penalty once, where the outstanding tax has not been paid in full, towards the end of the two year time limit. The legislative change will mean that taxpayers will not be able to intentionally avoid a second Late Payment Penalty by not paying their tax before the end of the two year time limit, thereby creating fairness between taxpayers who pay their tax and those who do not.  

We expect tax and accounting bodies and taxpayers to be interested in this consultation. 

Documents

The Penalties for Failure to Pay Tax (Schedule 26 to the Finance Act 2021) (Assessments) Regulations 2024: draft legislation

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Ways to respond

Published 14 May 2024