- Implementation and Scope:
- A new penalty system for late tax payments has been in effect for VAT taxpayers since January 1, 2023, and now also applies to Income Tax Self-Assessment taxpayers using the Making Tax Digital service, either in the pilot from April 2024 or mandated from April 2026.
- Regulation Details and Objective:
- The Penalties for Failure to Pay Tax (Schedule 26 to the Finance Act 2021) (Assessments) Regulations 2024, effective from December 4, 2024, aim to target taxpayers who intentionally avoid a second late payment penalty by not paying their tax within the two-year limit. The second penalty is 4% per annum until the tax is fully paid.
- Key Changes and Adjustments:
- The regulations now allow HMRC to assess and charge the second late payment penalty even if the outstanding tax is not fully paid by the end of the two-year period. A change from the draft allows for a second penalty when ‘time to pay’ (TTP) arrangements exceed the two-year limit, but the penalty calculation will be limited to the period before the TTP agreement was established, provided the agreement is adhered to.
Source KPMG
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