Consultation on further penalty simplificationFriday, June 24th, 2011
HMRC begins consultation on reforms to the remaining tax penalties.
Since 2007, HMRC has introduced new penalty structures for common offences across the different tax and duty regimes. Those that impact on the taxes involved in payroll are:
- penalties for inaccuracies in returns
- penalties for late filing
- penalties for late payment.
There are however, over 300 other “regulatory” civil penalties that apply to specific compliance failures within the various tax regimes. These include, for example, some 75 separately-defined penalties that apply to income tax, although about two-thirds of those are defined in exactly the same way.
On 31 January 2011, HMRC published a discussion document entitled The Simplification of Regulatory Penalties, which explored these many other penalties and sought views on the potential for simplification and alignment. Options considered include changing discretionary penalties into fixed penalties, simply scrapping those that are redundant, and introducing one single regime with a minimum-maximum penalty range, but including a provision to increase the penalty where the financial advantage gained by the breach is more than the maximum.
Based on the feedback from the discussion document, HMRC published, on 17 June, the first of two consultation documents on these remaining regulatory penalties. This consultation seeks to establish the design principles which should be applied to the reform of the penalties and to examine possible features of a new model, or models. Detailed proposals for reform will follow in a later consultation.
The questions posed for feedback are, therefore, very general in this consultation. They include, for example, options for grouping different penalties together, how to make penalties proportionate to the impact of the regulatory failure, whether the concept of behaviour is appropriate to these penalties, whether any sanctions should be non-financial, and whether the “reasonable excuse” concept is relevant to some or all of the penalties.