CH192240 - Effect of moving between groups of returns: effect on points of changing submission frequency

NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”

Where the frequency of a taxable person’s submission obligations change so that they fit within a different group of returns for the same business or businesses, there are special rules which determine the penalty points the taxable person has for the new group.

• If the taxable person had no penalty points for the old group of returns, they will have no penalty points for the new group.
• If the taxable person had penalty points for the old group of returns, the number of penalty points for the new group is adjusted as shown in the table below.

Previous submission frequency	New submission frequency	Penalty points adjustment
Annual and non-standard periods over 20 weeks	Quarterly etc.	+2 points
Annual and non-standard periods over 20 weeks	Monthly etc.	+3 points
Quarterly and non-standard periods over 8 and up to and including 20 weeks	Annual etc.	-2 points
Quarterly and non-standard periods over 8 and up to and including 20 weeks	Monthly etc	+1 point
Monthly and non-standard periods up to and including 8 weeks	Annual etc	-3 points
Monthly and non-standard periods up to and including 8 weeks	Quarterly etc	-1 point

If the adjustment gives a total of less than zero, the adjusted number of penalty points is treated as zero.

If the adjusted number of penalty points for the new group of returns is greater than zero, but less than the number of penalty points for the old group of returns, the penalty points that remain are the penalty points that were awarded for the most recent failures.

For example, if a taxable person submits quarterly VAT returns and has been awarded penalty points for late submissions for the periods ending 31 March 2023, 30 June 2023 and 30 September 2023, their points total is 3. If this person then moves to annual returns, per the table above they lose 2 points from this resulting in their new points total being 1. The points they had for the periods ending 31 March and 30 June 2023 expire, leaving the penalty point relating to the period ending 30 September 2023.

If the adjusted number of penalty points for the new group of returns is greater than the number of penalty points incurred for the old group;

• all the penalty points for the old group are treated as penalty points for the new group and
• the additional penalty points are treated as being awarded for relevant failures occurring on the same day as the most recent relevant failure.

For example, if a taxable person submits quarterly returns and has been awarded penalty points for late submissions for the periods ending 31 March 2023, 30 June 2023 and 30 September 2023, their points total is 3. If this person then moves to monthly returns, they have 1 penalty point added, and their new total is 4. The previous 3 penalty points are treated as penalty points for the new group and the new penalty point is counted as having been incurred on the same day as the 30 September 2023 point.

The adjustment to penalty points will be added after the earlier of:

• The final submission due date for returns under the old frequency
• The first submission due date for returns under the new frequency

In the unusual circumstances that a submission due date for an old frequency return falls after the frequency adjustment penalty points are added, a penalty point incurred for that old frequency return would be evaluated against the new frequency penalty points maximum.

The adjustment penalty points added as a result of the change in group do not carry rights of review or appeal.

In addition to the change in penalty points total, the penalty points maximum will change as shown below.

Previous submission frequency	Previous penalty points maximum	New submission frequency	New penalty points maximum
Annual and non-standard periods over 20 weeks	2	Quarterly etc.	4
Annual and non-standard periods over 20 weeks	2	Monthly etc.	5
Quarterly and non-standard periods over 8 and up to and including 20 weeks	4	Annual etc.	2
Quarterly and non-standard periods over 8 and up to and including 20 weeks	4	Monthly etc.	5
Monthly and non-standard periods up to and including 8 weeks	5	Annual etc.	2
Monthly and non-standard periods up to and including 8 weeks	5	Quarterly etc.	4

See CH192210 for the expiry of points when there is a change of submission frequency.

FA2021 SCH24 paras 10,11 and 12