Changes To VAT Late Filing and Late Payment Penalties

HMRC continue to highlight recent changes to VAT late filing and late payment penalties for 2023.

For VAT accounting periods commencing on or after 1 January 2023, late submission penalties may apply if a VAT return is submitted late. This includes nil or repayment returns.

The VAT default surcharge is being replaced by new penalties for returns that are submitted late and VAT which is paid late. The way interest is charged is also changing.

Late filing penalties

Broadly, for each return submitted late, a penalty point will be imposed until the penalty point threshold is reached. At this stage a £200 penalty will be imposed and there will be further £200 penalties for each subsequent late submission while at the threshold.

For example, for a business filing VAT returns quarterly, the points threshold is four on a rolling twelve-month basis. If a business files a return late, a penalty point will be imposed. This starts the twelve-month clock ticking. If the business files on time for the next twelve months, the point will disappear. However, if another return is filed late a second penalty point will be imposed and another twelve-month period commences.

Similar regimes apply for annual and monthly return filing.

Penalty points and penalties may be appealed.

More guidance on late filing penalties can be found on the Government Website.

How late payment penalties work

For VAT accounting periods starting on or after 1 January 2023, late payment penalties apply to late VAT payments. The VAT default surcharge is replaced by new penalties for VAT which is paid late and can apply to any payments of VAT not paid in full by the relevant due date except VAT payments on account and instalments for the VAT Annual Accounting Scheme.

When your payment is 31 or more days overdue, your first late payment penalty increases, and you get a second late payment penalty.

More guidance on how late payment penalties work can be found on the Government website.