Due to a newly introduced project called Making Tax Digital (MTD), the HMRC will now be changing how taxpayers interact with them.
What Does The Points System Mean?
By now, if you are a VAT registered business, it is more than likely that you have already been submitting your VAT returns via software that has been made compatible with the MTD project. However, from April 2023, unincorporated businesses will have to start doing the same. Rather than once a year, unincorporated companies must begin reporting their income tax on a quarterly basis, which is already the case for their self assessment.
Following on from this, the HMRC has announced that they will be using a new point-based system designed to encourage taxpayers to submit their MTD updates by the deadline. For every late VAT or income tax return, the taxpayer will be issued points. If they reach a set number of points, an automatic £200 penalty will be issued. This point system will be in action from the 1st April 2022 for VAT and the 6th April 2023 for taxpayers submitting MTD income tax updates. Sanctions for late payment of tax will also be harmonised across all taxes.