MTD Penalties: points based

What do points mean under MTD?  Penalties!

Brucie Headache for MTD

It’s enough to have even given Brucie a headache!!

HMRC are changing how the current penalty regime works and introducing a points based system of late filing penalties.

This is expected to come into force after 2021 and will be applied initially to Income Tax Self Assessment and VAT submissions.  There is a one year grace period for Making Tax Digital (MTD) filing and further delays are potentially allowed for “familiarisation” under the legislation.  It applies to regular annual, quarterly and monthly returns for Income Tax Self Assessment & VAT.

How this works: in summary

  • A point will be received for each late submission.
  • At a certain threshold, a penalty will be charged.
  • Every late submission thereafter will also incurs a penalty.
  • The points will be reset to zero after a period of good compliance (i.e. timely submissions).

HMRC intends to proceed with the following penalty thresholds:

Submission frequency    Penalty threshold
Annual    2 points
Quarterly (inc MTD)    4 points
Monthly    5 points


HMRC propose the following periods of good compliance, which would be required to reset the points:


Submission frequency    Good compliance period
Annual    2 submissions
Quarterly (inc MTD)    4 submissions
Monthly    6 submissions


Points will only be able to be reset if all submissions due in the previous 24 months have been made.

It is expected that the new rules will be implemented alongside the start of MTD for VAT in 2020, with a 12-month soft-landing. It will, over time, be rolled out to as many taxes as appropriate.

See the links below for more information

HMRC Technical note: Late Submission penalties

HMRC Policy paper: Late Submission penalties

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