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image of footballers in penalty shot | accountingweb | New guidance for penalties on MTD ITSA volunteers
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Guidance issued on penalties for MTD ITSA testers

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HMRC has introduced new guidance for late-filing and late-payment penalties for the private beta for Making Tax Digital for income tax self assessment.

12th Apr 2024
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As announced at the Festival of Accounting & Bookkeeping (FAB), the private beta for Making Tax Digital for income tax self assessment (MTD ITSA) will go live from 22 April 2024 for taxpayers with an annual income over £50,000 who have signed up to take part on a voluntary basis. HMRC has issued new guidance relating to fines for late submission and payment, which will come into effect for taxpayers choosing to take part in the testing process.

A major overhaul to the penalties regime for VAT saw the default surcharge replaced with a new system based on penalty points. These changes came into effect on 1 January 2023, after MTD for VAT was extended to all VAT-registered businesses the previous April. As predicted, HMRC has announced similar changes to penalties for late submission and late payment of self assessment income tax under MTD ITSA.

HMRC is writing to anyone who has signed up for the testing phase prior to 6 April 2024 asking them to confirm that they agree to the new penalties system. This can be done by the taxpayer or an agent acting on their behalf. This confirmation will be included in the sign-up process for those joining the beta after 6 April.

The point of no (tax) return

The points system will essentially allow for one penalty-free late submission in a 24-month period. Each annual return submitted after the deadline will incur one penalty point. If no further late submissions occur within (around) 24 months, HMRC will automatically remove the penalty point.

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Replies (23)

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By Paul Crowley
12th Apr 2024 16:37

Only HMRC could be that daft.
If I read this correctly, then the unpaid volunteers get a bigger punishment for late payment than others.
If true then consider PII claims could arise if this is not pointed out to volunteers.

Thanks (10)
the sea otter
By memyself-eye
12th Apr 2024 17:46

This is beyond stupid.
Stop the merry go round I want to get off.....
Oh, I did get off.
Makes the post office sound positively benign.

Thanks (6)
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By FactChecker
12th Apr 2024 19:28

If you are, for instance, late with your 2nd Pilot EoY (or whatever it's called by then), your personal 'penalty clock' will have been started ... meaning that if you are late again *anytime in the next 2 years* then the penalties will start piling up.

So someone who has 'helped out' by being in the Pilot may be penalised for a late 2026-27 EoY return ... whereas someone else in the same position (but who didn't take part in the Pilot) won't be penalised!

Thanks (13)
Replying to FactChecker:
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By Paul Crowley
12th Apr 2024 21:18

Anyone volunteering now would a bit of a Gordon.
https://www.youtube.com/watch?v=ybp-NbONgBo

Thanks (5)
Stepurhan
By stepurhan
12th Apr 2024 23:19

MTD Advocate 1 : Should we give an incentive to get people to join MTD testing to ensure we get lots of volunteers and a useful range of data?

MTD Advocate 2: No, we should get them to agree to a new system of penalties for failing to comply with the new system.

Is this still April Fool's Day? Because surely there can be no rational real world reason for this decision.

Thanks (15)
Tornado
By Tornado
13th Apr 2024 09:21

This rather unhelpful penalty system may be a bit of a downer for volunteers so I am going to stick my neck out here and predict that the number of people joining the beta/pilot is probably going to be less than 400,000 and might even be less than 9.

Thanks (13)
David Ross
By davidross
15th Apr 2024 09:49

Morons !

(don't read this if you are in Scotland)

Thanks (4)
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By Rob Swan
15th Apr 2024 10:34

Well....
Think that just about confirms it...

MTD ITSA trial is run by idiots!

Guessing there will be zero participants in the trial. Which means we can expect the following statement from (you know who)... "We ran the trial and there were no problems or complaints. We're calling it a huge success!"

Says way too much about HMRC's attitude to taxpayers.
(But I wouldn't be surprised if there's a sudden re-think in the next 24 hours.)

Thanks (5)
Replying to Rob Swan:
By Nick Graves
15th Apr 2024 11:14

That's an insult to idiots.

Thanks (3)
Replying to Nick Graves:
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By Rob Swan
15th Apr 2024 12:14

Fair comment.

Thanks (1)
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By Twickers Call
15th Apr 2024 10:48

Get rid of this MTD. Why should one volunteer if there are penalties?

Thanks (7)
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By fmuk
15th Apr 2024 11:16

This is obviously an April fool. Only HMRC has got the date wrong (nothing new there then!)

Thanks (4)
By ireallyshouldknowthisbut
15th Apr 2024 11:28

Are they deliberately sabotaging the pilot?

Or are they just really, really, really stupid?

Thanks (4)
Replying to ireallyshouldknowthisbut:
Tornado
By Tornado
15th Apr 2024 12:21

They are definitely not just really, really, really stupid.

But in my opinion they are definitely, really, really, really, really, really, really stupid!

It is all just breathtakingly incomprehensible.

Thanks (6)
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By GHarr497688
15th Apr 2024 11:37

Are you sure this article is correct. Should HMRC not be paying these poor people to volunteer. Anyone who encourages this new regime is mad.

Thanks (5)
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By Mr J Andrews
15th Apr 2024 12:17

More fools them for signing up. Or were they perhaps sado masochists ?

Thanks (3)
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By steve 12321
15th Apr 2024 12:40

They need to stop kidding themselves this is a good step forward and scrap it as a mater of urgency and focus on tax evasion, covid fraud and making the UK a place to do business - where is the incentive when taxes are so high?

Thanks (4)
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By Ian McTernan CTA
15th Apr 2024 13:10

So, absolutely no incentive to join, and penalties too.

You couldn't make this up.

Anyone who signs up on this basis (or worse, gets their clients to do so)....

Thanks (4)
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By jonharris999
15th Apr 2024 14:06

It's worse than it would be if noone signed up - my guess is that the handful who do sign up will be:

* The largest firms, who may well have 50K+ folks on Sage;
* A tiny number of switched-on small firms who have 50K+ folk on QB, but anecdotally I reckon there are far fewer of these than have them on Xero, like we do.

Presumably no DIY individuals will or even can sign up.

As I've said here before, I'm if not a total fan then I'm at least an oh-go-on-then about MTD - but this is hopeless. It's worse than not having a Beta at all, because the feedback will be so partial.

Thanks (1)
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By Yossarian
15th Apr 2024 14:27

I get the impression now HMRC are trying to kick the can just far enough down the road that a new government will be in power, in time to scrap the whole thing and blame the Tories.

Thanks (3)
Replying to Yossarian:
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By steve 12321
15th Apr 2024 18:31

that would be fine! The Tories are too silly to realise the harm this will cause.

Thanks (1)
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By cmiskin
15th Apr 2024 19:11

“ One up side of the new regime over the current model is that up to 15 days can elapse before any penalty is levied. ” is incorrect I think, currently have 30 days before a late payment penalty is charged on a late SA payment.

Thanks (0)
Replying to cmiskin:
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By Amy Chin
15th Apr 2024 22:33

Thanks for picking that up, we have updated the article accordingly.

Thanks (0)