Exploring communication needs of customers for the implementation of changes to Late Payment and Late Submission Penalties

HM Revenue and Customs (HMRC) is considering changing the system for issuing penalties for late submissions and late payments of Value Added Tax (VAT) and Income Tax Self Assessment (ITSA), in order to simplify penalties across taxes, promote fairness, and encourage compliance. Under the potential changes:

• The late submissions penalty regime would be points-based.
• The late payment penalty regime would involve different charges depending on the lateness of the payment.

HMRC commissioned Ipsos to carry out qualitative research to explore the best ways for communicating the potential changes to VAT and ITSA customers, including appropriate channels. Customers were shown different versions of written and visual draft communications during the research. Visual communications explained the potential changes through diagrams and infographics, and some variations also included accompanying text.

This research was conducted in response to the Budget 2018 announcement of reviewing the communications needed for penalty reform implementation and before any final decisions were taken on penalty reform.

Findings

• When they were first shown the communications, customers found them relatively complex, and needed support to understand them, regardless of which materials they were shown first. However, understanding of the regimes improved through additional information and discussion.
• Customers wanted information on what the current regimes looked like, and to understand HMRC’s rationale for the changes. They also felt that a glossary, clearly defining all technical terms used in the materials would be beneficial.
• Customers found a visual approach appealing in theory, but tended to find the written GOV.UK style guidance to be the most helpful.

Customers preferred the materials that explained how the penalty regimes would work step-by-step, and they preferred to have less detailed information about the regimes, unless it was directly relevant to their situation. Once it became relevant, they wanted more detail. They felt that their appetite for detail would increase as the rollout progressed:

• Announcing the changes: they required minimal information at this stage, feeling that a high-level overview would suffice.
• Introducing or implementing the changes: they would welcome more detail at this stage, namely a step-by-step explanation of how the regimes would work.
• Informing customers of a penalty: they expected to be notified by letter and thought communications should have a balanced tone, with HMRC focusing on supporting customers to avoid or minimise penalties in the future.

Technical details

Fieldwork consisted of six focus groups and 18 face-to-face in-depth interviews across three locations (Birmingham, London and Manchester). Fieldwork took place between 3-14 June 2019. Six pieces of draft communications were tested: two for late submission, three for late payment, and one covering both. The draft communications materials are included in the Appendix of the report, available for download below.

Download the report here.