The new penalties for submitting and paying VAT returns late came into effect 1 January 2023. These will be replacing the default surcharge and will now apply to customers who submit nil or repayment returns.
What will happen if you submit a late VAT return?
If you submit a VAT return for periods that start on or after 1 January 2023, you will receive penalties based on a point system. For each VAT return that is submitted late you will be given one point. You will have to pay a fixed £200 penalty if you reach your point threshold. Additionally, you will have to pay £200 each time you submit your VAT return late while you are at the threshold. Your points threshold is dependent on how often you need to submit a VAT return.
What happens if you don’t pay your VAT on time?
You will have to pay a first late payment penalty if your payment is over 15 days overdue. You will also have to pay a second penalty if your payment is over 30 days overdue. Additionally, from the day after your VAT payment is due to the day it is paid back fully, you will be charged late payment interest. The interest is calculated at the Bank of England base rate + 2.5%.
HMRC Support
The HMRC will be providing support in order to help customers get used to the new penalty system in the first year. HMRC won’t charge a first late payment due on or before 31st December 2023 if you pay in full or ask for a payment plan within 30 days of the payment due date. If your payment is 31 days or more overdue you will have to pay a first and second late payment penalty.
HMRC will also support in setting up a payment plan to pay in instalments if you are unable to pay your VAT bill in full. After 31st December 2023 if you request a payment plan from HMRC within 15 days of the payment being due and it is agreed on by them you won’t be charged a late payment penalty for periods starting on or after 1 January 2023.
Even if you have a payment plan in place you will still have to pay late payment interest on overdue payments.
You will be liable to pay late payment penalties if you don’t request a payment plan within 15 days or if HMRC do not agree to it.
