Key Facts

• Amendments reduce penalties at 15 and 30 days post-due date.
• Amendment extends the time limit for assessing penalties from 2 years to 3 months.
• New clause mandates a review by the Chancellor of Exchequer within six months on the effects of sections and schedules related to tax revenues.
• New points-based penalty system introduced by clauses 112 and schedules 23-24 for regular tax return obligations.
• Two-penalty model for VAT businesses and ITSA taxpayers introduced by clause 113 and schedule 25.
• First late payment penalties will not be applied after 15 days in the first year, giving taxpayers 30 days to contact HMRC before any charges are made.
• Regulations will take effect from April 1, 2022 for VAT taxpayers; April 6, 2023 for ITSA taxpayers with income over £10,000 submitting quarterly returns digitally; and April 6, 2024 for all other ITSA taxpayers.
• Two-year time limit remains for HMRC to assess penalties after missed obligations.
• 'Time to pay' arrangements can be renegotiated if circumstances change.
• HMRC introduced a new points-based penalty system for failure to make or late submission of returns.
• Schedule 24 makes minor changes to the penalty for deliberately withholding information from HMRC.
• Taxpayers face six separate filing obligations under Making Tax Digital for income tax self-assessment over a year.
• The first penalty for businesses and individuals not paying their tax on time is 2% of the amount unpaid after 15 days, with an additional 2% after 30 days.
• A new late-payment penalty interest rate of 4% per annum applies from day 31.
• Schedule 26 amends section 1303 of the Corporation Tax Act 2009.
• Amendment 24 aims to reduce HMRC's time limit to assess penalties.
• Amendments 3 to 14 seek to simplify the proposed penalty regime for late payment.
• The tax gap is estimated at £30 billion in 2018-19.
• Scottish limited partnerships are criticized for potential abuse by sophisticated criminal players.
• The Chartered Institute of Taxation welcomes harmonisation of interest rules.
• The Low Incomes Tax Reform Group acknowledges HMRC's efforts to ensure the penalty regime is fit for purpose.
• Buzzacott, a UK top 20 accountancy firm, supports the system as fairer and less likely to excessively penalise traders.
• HMRC will notify taxpayers of points or penalties at regular intervals via digital tax accounts and written letters.
• Clause 116 and schedule 28 amendments aim to align late payment and repayment interest for VAT with income tax self-assessment.
• The changes will take effect by way of regulations from accounting periods starting on or after 1 April 2022.
• Amendment 19 removes restrictions on VAT credit carrying repayment interest during HMRC inquiries or corrections.
• HMRC can issue financial institution notices without taxpayer or tribunal approval.
• The measure is justified by HMRC's need to meet international obligations for tax avoidance and evasion.
• The House of Lords Economic Affairs Finance Bill Sub-Committee recommended reviewing the process to streamline information requests.
• An authorised HMRC officer must approve each notice after training and passing a test.
• Financial institutions have appeal rights against penalties.
• HMRC will submit an annual report on the use of financial institution notices to Parliament.
• Clause 123 amends Schedule 36 of the Finance Act 2008.
• HMRC will issue information notices to obtain documents and information for collecting tax debts.
• The changes aim to comply with OECD international standards on exchange of information.
• Clause 125 introduces a new power for international reporting rules for digital platforms.
• The OECD model rules apply to platforms like taxi and private hire services, food delivery, freelance services, and short-term accommodation letting through apps and websites.
• An estimated 2 to 5 million businesses providing services via digital platforms will be affected by these measures.
• Goods seized in situ can currently be removed without penalty.
• Pressures on existing warehouse space mean more seizures occur at traders' premises.
• Clause 126 amends schedule 3 to include civil penalties for unauthorised removal of seized goods.
• The Chancellor must review the impact on investment in parts of the United Kingdom and regions of England within six months.
• The review compares GDP estimates under three scenarios: with the provisions enacted, without them, and if UK fiscal stimulus mirrors US levels.
• 'Parts of the United Kingdom' include England, Scotland, Wales, and Northern Ireland.
• The stimulus package suggested by President Biden could have added up to 134,000 jobs in Scotland.
• A different approach might result in approximately 1 million to 1.5 million additional jobs in England.
• The Scottish Parliament's Budget process often incorporates suggestions from opposition parties.
• The Finance (No. 2) Bill has completed its Committee stage.
• MP Jesse Norman thanked the Chair, Sir Gary Streeter, Hansard, Whips, parliamentary private secretaries, and officials for their support during the Committee stage.
• External stakeholders from organisations such as ATT, CIOT, ICAEW, and Low Incomes Tax Reform Group provided constructive input.