HMRC explains new penalty regime and VAT deferral scheme deadline

Santhie Goundar reports on the upcoming new penalty regime for VAT and income tax, and the closure of the VAT deferral New Payment Scheme next month.
HMRC held sessions at the Accountex Virtual Summit on 12–13 May, explaining how its new penalty regime (coming into force from 2022) will work, and confirmed businesses with deferred VAT who want to apply to its New Payment Scheme must do so by 21 June 2021.

The new penalty regime

Alongside its Making Tax Digital (MTD) programme, HMRC is bringing in a new penalty regime that will be a points-based system applying to the late submission of returns, alongside new rules for the late payment of tax – which includes harmonisation of interest rules for VAT to bring them in line with the rules for ITSA and corporation tax.

The new regime is being brought in for VAT taxpayers for their first VAT return period starting on or after 1 April 2022, then for income tax self-assessment (ITSA) taxpayers required to submit their returns via MTD for their first tax year or accounting period starting on or after 6 April 2023. For other ITSA taxpayers, the new regime will apply for their first tax year or accounting period starting on or after 6 April 2024.

“One reason we’re changing penalties across the tax regime is that the same penalty can be very different for different taxes, and we want to be consistent – as well as simpler, fairer and more effective,” Chris Jennings, penalty reform lead at HMRC, explained, adding HMRC guidance would be produced or updated in due course.

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