VAT penalties regime has changed, read on for more information…

From 1 January 2023 , new VAT late submission and payment penalties apply which replaces the default surcharge for VAT. Under the new rules , late payment and filings of VAT will be treated separately.

Lets look firstly at payment of VAT

  • Payments that are up to 15 days late will not trigger any penalty regardless of the number of occurrences.
  • Payments between day 16 and day 30 will incur a penalty of 2% of the outstanding liability at day 15 (However, HMRC will not apply this rule until 2024 to help businesses with the transition).
  • Payments that are 31 days late or more will trigger a 2% penalty at day 15 plus an additional 2% penalty on the amount outstanding on day 31. (So 4% if nothing has been paid).
  • Also, from day 31, there will be a daily penalty (4% per annum) on the amount outstanding. (e.g. a VAT liability left unpaid for 13 months will have triggered a total of 8% in tax penalties).
  • Interest on overdue tax will continue to be charged from the due date at Bank of England base rate plus 2.5% and will continue to accrue even when a time to pay arrangement has been agreed.

Secondly what happens if the VAT return is submitted late

  • For each return you don’t submit you will get a penalty point, once you receive a penalty point threshold, you will receive a £200 penalty and a further £200 penalty for each subsequent late submission while you are at the threshold.
Accounting Period Penalty points Threshold Period of compliance
Annually 2 24 months
Quarterly 4 12 months
Monthly 5 6 months

So if you have any queries with the new VAT penalties from 1 January 2023 or you need assistance with your accounting please get in touch with Cloud accounts Services Limited, we will be happy to help.