May 2024 / United Kingdom

The UK tax authority, His Majesty's Revenue and Customs (HMRC), has announced a consultation on draft regulations relating to the reformed penalty system for the late payment of tax.

The new regime is covered in Schedule 26 to the Finance Act 2021 and the penalty is proportionate to the length of time the tax is outstanding. In brief, unless a "time-to-pay arrangement" has been made, a first penalty of 2% is charged on the tax unpaid 15 days after the due date and 2% on the amount unpaid 30 days after the due date. A second late payment penalty is charged on unpaid tax at 4% per year until payment is made.

The existing legislation allows HMRC to assess the second late payment penalty once, when the amount of outstanding tax is paid in full, within a 2-year assessment time limit, but this would mean the charge could be avoided by delaying payment until after that date. The proposed regulations would enable HMRC to assess and charge the second late payment penalty towards the end of the two-year time limit. Paragraph 17 of Schedule 26 then allows HMRC to charge a supplementary penalty at 4% a year if the original assessment is insufficient.

The new penalty regime applied to VAT payers from 1 January 2023 and from 6 April 2024 for income tax self-assessment taxpayers who have volunteered for the Making Tax Digital (MTD) service. The regime will apply to all other income tax self-assessment taxpayers as MTD is rolled out from 6 April 2026.

Source: IBFD Tax Research Platform News

This measure extends the window to claim the tax reliefs available in Freeport and Investment Zone special tax sites from 5 to 10 years. The new sunset dates for the reliefs are:

• 30 September 2031 for all special tax sites in respect of English Freeports
• 30 September 2034 for all special tax sites in respect of Scottish Green Freeports and Welsh Freeports
• 30 September 2034 for all special tax sites in respect of Investment Zones

The tax reliefs available in special tax sites are:

• enhanced structures and buildings allowances (eSBA)
• enhanced capital allowances (ECA) for plant and machinery
• secondary Class 1 National Insurance contributions relief for eligible employers on the earnings of eligible new employees up to £25,000 per annum for up to 3 years
• Stamp Duty Land Tax (SDLT) relief, in respect of special tax sites in England

These reliefs will benefit businesses investing and hiring new employees in, or connected with, freeport or investment zones. By extending the period over which the above tax reliefs are available, it is hoped that this will stimulate investment by providing greater certainty to investors.

Extending the duration of the tax reliefs available in Freeport and Investment Zone special tax sites will:

• deliver benefits to businesses to stimulate investment
• provide greater certainty to investors to maximise the programme’s impact

This measure will take effect from 21 May 2024.

Source: gov.uk