Citation, commencement and effect

regulation 1 + 1.—(1) These Regulations may be cited as the Finance Act 2021 (Increase in Schedule 26 Penalty Percentages) Regulations 2025.

(2) These Regulations come into force on 31st May 2025.

(3) These Regulations have effect in relation to a failure to pay the tax due where the specified date(2) is on or after 31st May 2025, unless—

regulation 1 3 a + (a)the tax due is income tax or capital gains tax that is payable in respect of the tax year 2024-25(3) or an earlier tax year, or

regulation 1 3 b + (b)the tax due is value added tax that—

regulation 1 3 b i + (i)is payable by reference to a prescribed accounting period that began before 1st April 2025, or

regulation 1 3 b ii + (ii)has been assessed under sections 80(4A) or 80B of the Value Added Tax Act 1994 (recovery of excess credit)(4) in relation to value added tax payable by reference to a prescribed accounting period that began before 1st April 2025.

term prescribed accounting period + (4) In this regulation “prescribed accounting period” has the same meaning as in the Value Added Tax Act 1994(5).

Amendment of Schedule 26 to the Finance Act 2021

regulation 2 + 2.—(1) Schedule 26 to the Finance Act 2021 is amended as follows.

(2) In paragraph 5 (first penalty: tax remains due at end of 15 day period)—

regulation 2 2 a + (a)in sub-paragraph (4) for “2%” substitute “3%”;

regulation 2 2 b + (b)in sub-paragraph (5) for “2%” substitute “3%”.

(3) In paragraph 8 (second penalty: tax remains due at end of 30 day period), in sub-paragraph (3), for “4%” substitute “10%”.

Explanatory Note

(This note is not part of the Regulations)

These Regulations increase the penalties for late payment of tax in Schedule 26 to the Finance Act 2021 (“Schedule 26”).

Where tax is not paid within the period of 15 days, beginning with the day after the day on which it fell due, a first penalty is payable under paragraph 5 of Schedule 26. If the tax is then paid, or a time to pay agreement is made, within a 30 day period, these Regulations increase that penalty from 2% of the unpaid tax to 3%. If the tax is not paid in full within the 30 day period, and there is no time to pay agreement, these Regulations increase the penalty from 2% of the tax unpaid at the end of the 15 day period and 2% of the tax unpaid at the end of the 30 day period to 3% of the amounts unpaid at the end of each of those periods.

A second penalty is payable, under paragraph 8 of Schedule 26, on tax which is unpaid at the end of the 30 day period. These Regulations increase that penalty from 4% of the outstanding tax per annum to 10%.

A Tax Information and Impact Note covering this instrument will be published on the website at https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.