Penalties review offers scope for real change, say tax professionals
The Association of Taxation Technicians (ATT) has welcomed a comprehensive HMRC review on tax penalties but is calling for a more efficient use of suspended penalties to encourage long-term compliance. The Association has welcomed this consultation as a much needed opportunity to consider how the various penalty regimes can be improved.
In its response1 to HMRC’s discussion document, the ATT has highlighted the importance of penalties being proportionate and of recognising that uncharacteristic and genuine mistakes require a very different response from persistent failure.
The Association believes that increased digitisation has the potential to enable earlier identification and correction of unintentional non-compliance, to help taxpayers better understand their own compliance history and even to explore the possibility of self-assessment of penalties.
ATT President, Natalie Miller, said:
“This consultation is very wide-ranging. It looks at how penalties might apply in situations as different from being a day late with a return ‘because life got in the way’ to deliberate under-declaration of income. In our response, we have made over twenty recommendations and suggestions – from bringing VAT Default Surcharges into line with other late payments regimes to considering the possible merits of tax awareness courses in place of monetary penalties – and we have emphasised the need for transparency and consistency in the application of penalties.
“A central theme of our response is the role of suspended penalties. These were introduced six years ago but there is scant information available about how widely they are used and there is some evidence that suspension is not considered where it should be. HMRC rightly say in the introduction to this initial consultation “we want compliance, not penalties”.
“The purpose of suspending a penalty is to incentivise the taxpayer to become compliant. If doing so is more likely to encourage long-term compliance than collecting a penalty (which may cause resentment of the tax system), it makes sense to use that suspension facility more.
“We are sure that if our ideas and those of everyone else who responds to this opening consultation are taken into account, there is a real chance to develop an overall approach to penalties that is coherent, practical, cost-effective and capable of delivering greater compliance. The process has started well. Provided that HMRC keeps a similarly open mind in the subsequent consultation stages, there is a real opportunity to create a penalty regime that makes much better sense than parts of the system that we have at the moment.”
Notes for editors
1. HMRC penalties: a discussion document, can be read in full here.
Technical Team