HM Revenue and Customs: New penalties for submitting VAT returns or paying VAT late

As from 2023 HMRC has introduced a new Value Added Tax (VAT) penalty and interest regime for late submissions of VAT returns and late VAT payments that replaces the default surcharge regime. We informed you about this before but the introduction was delayed to 1 January 2023. The aim of the reforms is to reduce penalties for taxpayers with a good compliance record compared to frequent offenders. In addition, the new penalties also apply to customers who submit nil or repayment returns.

Late VAT return submissions:

For VAT periods starting on or after 1‌‌‌ ‌‌January 2023, penalties for submitting VAT returns too late will be applied on a points-based system. One penalty point will be given for each VAT return submitted late. Once the accumulated number of late return penalty points is reached, a £200 fine is due. You will also have to pay another £200 penalty, each time you submit your VAT return late while you are at the threshold. Your points threshold will depend on how often you need to submit a VAT return. For most quarterly submissions, this will be 4 penalty points and or monthly reporters this will be 5 penalty points. They will role over for 24 months.

Late VAT payment penalty

This penalty is based on the amount and the time the VAT payment is overdue. A 2% penalty start after 15 days from due date and a 4% penalty after 30 days. At the same time, daily accrued interest will start after 30 days (HMRC is also obliged to pay interest on overdue refunds).

Late payment interest

The interest is changed at the rate as published by the Bank of England plus an additional 2,5% from the date the VAT is due to be paid.

HMRC has published that they are supporting taxpayers to get used to the new penalty system during 2023, a first late payment penalty on VAT payments due on or before 31-12-2023 will not be charged if a taxpayer either;

  • pays in full within 30 days of your payment due date
  • asks for a payment plan within 30 days of your payment due date and HMRC agrees to it.

If your payment is 31 days or more overdue, you will have to pay a first and second late payment penalty. However, HMRC is also supporting with payments plans to pay in instalments.

After 31‌‌‌ ‌‌December 2023, if you request a payment plan from HMRC within 15 days of the payment being due and HMRC agrees with this plan, you will not be charged a late payment penalty for periods starting on or after 1‌‌‌ ‌‌January 2023. You must also ensure you keep to the conditions of the payment plan.

Would you like us to help you with your VAT obligations?

Let us know what we can do for your organization. Call us on +31(0)88-4321800, send an email to info@pincvision.com or even easier, fill out the contact form at the bottom of this page and we will contact you!

Please contact us if you require more information or read the documents indicated in below link:
Penalty points and penalties if you submit your VAT return late

How late payment penalties work if you pay VAT late

25 Jan 2023 at 10:30 am
3 min
Published by:
Daniëlle van der Meulen-Idema
Sr. VAT Specialist
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