Taxpayers who fail to use Making Tax Digital, the Government\u2019s all-new digital tax system, will face fines of up to \u00a33,000, according to a consultation paper released today.<\/p>\n
Making Tax Digital will see the end of the paper tax return and force the majority of taxpayers to file quarterly digital tax reports.<\/p>\n
In the new consultation paper, HM Revenue & Customs (HMRC) said deliberate failure to keep digital records may result in fines of up to \u00a33,000.<\/p>\n
Fines for late submissions were not specified, which may mean that they will follow the current penalty charge of \u00a3100.<\/p>\n
However, where fines are automatically charged under current rules, fines for Making Tax Digital will operate under one of three suggested schemes.<\/p>\n
Under option 1, a tiered points-based system, taxpayers will receive points for non-compliance, which will result in a fine once a penalty threshold has been met.<\/p>\n
The number of points given will be determined by the severity of the error.<\/p>\n
HMRC adds that long periods of \u201cgood behaviour\u201d will result in points being wiped from a taxpayer\u2019s account.<\/p>\n
It said firms will also be given a 12-month period where they can adjust to the new system and not be fined for late submissions.<\/p>\n
Under option 2, HMRC will conduct an annual review of compliance \u2013 an automated yearly review of taxpayers\u2019 submissions.<\/p>\n
HMRC proposes \u2018that for customers who provide an annual submission (for example, an annual VAT return or income tax self-assessment return) the review would be carried out within two months of the deadline for providing the submission\u2019.<\/p>\n
It adds that taxpayers would be contacted once a missed submission was identified and that they would be given the opportunity to remedy their tax affairs.<\/p>\n
The third and final option, suspended penalties, would see fines only charged if a taxpayer fails to submit a late return within a specified period of time.<\/p>\n
The consultation states that suspension could be applied on more than one occasion, but \u2018it is not the Government\u2019s intention to encourage taxpayers to establish a pattern of repeatedly providing submissions late, so the number of occasions on which a penalty would be suspended would need to be limited\u2019.<\/p>\n