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UK Delays Overhaul To Tax Non-Compliance Penalties

Thursday, January 20, 2022

HM Revenue and Customs is reforming late-filing and payment penalties to make them fairer and more consistent across taxes. The first stage of these reforms was set to come into effect early this year. However, on January 13, 2022, HMRC postponed the effective dates by nine months to one year.

The reforms will now come into effect:

  • For VAT taxpayers from periods starting on or after January 1, 2023;
  • For taxpayers in Income Tax Self Assessment (ITSA), from accounting periods beginning on or after April 6, 2024, for taxpayers with business or property income over GBP10,000 (USD13,722) per year (that is, taxpayers who are required to submit digital quarterly updates through Making Tax Digital for ITSA); and
  • For all other ITSA taxpayers, from accounting periods beginning on or after April 6, 2025.

As part of this reform, interest charges and repayment interest for VAT will be aligned with other tax regimes, including ITSA, and late filing and payment penalties will be harmonized.

HMRC has said that the "extra time allows [us] to ensure the IT changes necessary for the new penalties and interest charges can be introduced as effectively as possible, ensuring a high standard of service to customers".