HMRC response to Late Payment of Tax: Motivations and Sanctions report

HMRC is grateful to Ipsos Mori for this report. This research was commissioned by HMRC to develop a better understanding of HMRC's customers who pay late, and the effect of different interest, penalty and support regimes.

HMRC is currently consulting on the case for modernising and aligning penalties, harmonising the interest we charge on underpaid tax and pay on overpayments, and changes designed to help taxpayers to pay what they owe and to improve and modernise HMRC's ability to recover tax unpaid. The consultation documents including an assessment of the impacts and draft legislation is available at:

Meeting the Obligations to File Returns and Pay Tax on Time
Interest - Working Towards a Harmonised Regime
Payments, Repayments and Debt: The Next Stage

This research is particularly useful in addition to the responses HMRC receives from consultation in developing the evidence base for policy development on interest, penalties, payments and recovery of debts. In particular, this research focussed on taxpayers who had been in debt whose voice may otherwise go unheard.

HMRC has already started to take on board the outcome of this research. This research has helped inform HMRC policy decisions and new proposals. For example, including:

  • The Business Payment Support line announced at PBR which made clear that where businesses are struggling to meet their tax obligations, they would be offered time to pay their tax to a timetable they could afford. In addition, businesses will also not be charged surcharges for late payment for the period of the time to pay agreement.
  • HMRC are currently consulting on providing payment instalment schemes to help people avoid falling behind with tax payments. This should make tax payments easier to manage over a year and align tax with other business commitments.
  • HMRC have modified the penalty proposals to remove any fixed penalties for late payment which were seen in this report as being counterproductive and disproportionate. Proposals to suspend penalties when the tax is subject to a time to pay arrangements have also been included.
  • HMRC have also recognised the importance of alerting taxpayers to impending interest or penalties.