Late filing and late payment

Legislation will be introduced to reform penalty regimes for late filing of tax returns and late payment of tax. The new regimes will replace the current variety of penalties and will treat late payment and late filed returns separately.

The filing and payment obligations covered include those where the obligation to file or pay is annual (eg income tax and corporation tax) or occasional (eg IHT) and in addition taxes and deductions collected through the PAYE system and Construction Industry Scheme (CIS).

Whilst the obligations are broadly aligned across the taxes they are modified for PAYE and CIS.

Penalties will be applied for the first time to all employers who are late in making monthly PAYE and NICs payments and companies paying corporation tax late. There will be provisions for removing late payment penalties where taxpayers have agreed a time to pay arrangement with HMRC, whilst creating a more robust response to prolonged and repeated delay.

Implementation of the new penalties for late filing and late payment requires changes to HMRC’s computer systems and is to be staged over a number of years, starting with penalties for late payment of ‘in year PAYE’ from April 2010.
Comment

VAT is not part of the proposed measures but the government intends to introduce legislation for VAT in 2010.

Interest harmonisation

Legislation will be introduced to create a harmonised interest regime for the first time for all taxes and duties administered by HMRC, with the exception of corporation tax and petroleum revenue tax.

The legislation will make provision for the automatic setting and implementation of interest rate changes. This will replace the current range of interest regimes. HMRC will still be allowed to charge a higher rate of interest on late paid tax than they pay on late repayments.

Implementation of interest harmonisation again requires changes to HMRC’s computer systems and is to be staged over a number of years. Interest on late payments of ‘in year PAYE’ is expected to be introduced from April 2010.