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HMRC considering plans for new points-based penalty system

HMRC has announced its intention to reform the current penalty system for late or missing tax returns, as part of its review of tax administration and compliance.

Under the proposed new system, taxpayers who miss the self assessment filing deadline could receive driving licence-style points instead of an immediate fine. Taxpayers would only be penalised once their points reach a specified level. Points would also be wiped from an individual’s records after a set period of time.

Under the current system, taxpayers who fail to submit their tax return by the 31 January deadline are liable to an instant £100 fine, with further penalties applying for prolonged delays.

The new ‘holistic’ approach is intended to focus on taxpayers who persistently break the rules, rather than those who make genuine errors of judgement.

Outlining its plans, the Treasury said: ‘The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments.

‘This will ensure that the system is fair, simple and effective across different taxes. Final decisions on both measures will be taken following this latter consultation.’