HM Revenue & Customs (HMRC) has opened a consultation on penalties for firms that either submit records late under the Making Tax Digital (MTD) scheme or do not pay on time.

When HMRC consulted on its compliance powers last year, it was recognised that more work needed to be done on the matter but has come to the conclusion that in order to support customers during the transition to the new system, they would need to be given at least 12 months before being charged any late submission penalties.

In that consultation, most respondents considered penalty interest to be the most attractive option for a late payment sanction. However, current interest rules for Income Tax and Class 4 National Insurance Contributions (NICs) will continue to apply until the new rules are decided.

The consultation paper sets out three possible models for late submission sanctions and provides an update on late penalty interest, which could also be used for late penalty interest as a sanction for late payment of income tax, corporation tax and VAT.

Model A would be a points-based penalty, whereby a customer would receive a point each time they failed to provide a submission on time; Model B would be a regular review of a customer’s compliance over a set period of time and Model C would be a suspension of penalties whereby the penalty would be suspended on condition that the customer provides the outstanding submission within a specified time.

HMRC is inviting comments from anyone who is affected by or interested in these proposals, including businesses, individuals or agents. They must make their views known by 11 June 2017, when the consultation closes. A summary of responses will be published shortly after this date, as will draft legislation.