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Published on 21 June 2024

Draft legislation: The Penalties for Failure to Pay Tax (Assessments) Regulations 2024 - joint LITRG and CIOT response


Penalties for late payment of tax are being reformed. The new rules have applied to taxpayers in respect of VAT obligations since 1 January 2023 and to taxpayers voluntarily in scope of Making Tax Digital for Income Tax Self Assessment since 6 April 2024. LITRG and the CIOT have commented on the draft legislation which aims to give HMRC the power to assess the second late payment penalty in circumstances where the amount of tax is still outstanding after two years.

A typed page of legislation with a stamp of the word 'DRAFT' stamped onto it.

In our submission, we suggest certain amendments with a view to ensuring the regulations have the intended effect, as follows:

  1. Although the draft regulations mean that an assessment of the second late payment penalty can be made before the expiry of the statutory two year time limit, they do not change how the penalty itself is actually calculated (ie it is by reference to the whole penalty period) and so further amendments are required to enable the amount of the assessment to be determined.
  2. If a penalty is charged under these regulations when the tax has been outstanding for two years, there is currently no provision to subsequently assess a further penalty for the remaining period once the tax is eventually paid in full. Assuming the intention is for an assessment to be made for the later period, then further amendments are required.
  3. An amendment is required to clarify the position where a taxpayer breaks a Time-to-Pay arrangement at a point when HMRC is too late to assess the second late payment penalty which would otherwise arise, as these draft regulations do not cover this situation.

You can read LITRG’s full submission using the link provided. A link is also given to the original consultation on GOV.UK. 

Tom Henderson
Technical officer

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