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Published on 16 January 2024

Finance bill briefing: Clause 36 - Commencement of rules imposing penalties for failure to make returns etc


Clause 36 is a regulation-making power which allows for the new penalty regime on late filing and late payment to be brought into effect for income tax from 6 April 2024, with adaptations for those volunteering for the Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) pilot.

calculator saying 'penalties' stack of cash and a gavel

We still await the detailed regulations before being able to comment thoroughly on this proposal. At this stage, we note that the measure may encourage participation in the MTD pilot, because the new penalty regimes for late filing and late payment can be more lenient than the existing ones for occasional non-compliance. Although we acknowledge that it is not unusual to see incentives for joining pilots, we question whether this is fair on those unable to access the pilot.

However, our broader concern is that the new penalty regime is going to be brought in piecemeal, with no commitment on when it will be implemented in full. This means that there is great potential for confusion – and possibly unfairness – as a result of having two penalty regimes running concurrently. We would urge the government to introduce the new regime for all, at the same time, from 6 April 2026. If that is not possible, full clarity over the timing of its rollout should be given as soon as possible, with a clear commitment to minimise the period during which the two regimes run concurrently.

Kelly Sizer

Senior manager

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You can read LITRG’s full briefing using the link provided. 

LITRG’s briefing
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