We bring it to the attention of all out clients that after 1 January 2023, late VAT payments or late VAT returns will be subject to new penalties instead of the default surcharge. In addition, VAT Interest will be calculated in a different manner.
Who is affected
Everyone submitting VAT Returns for accounting periods beginning on or after 1 January 2023 will be affected by these changes. Late submission of nil repayment VAT returns may also result in penalty points and a financial penalty.
If you submit your VAT return late
Penalties for late submissions will be based on a points system.
You will receive one penalty point for each VAT Return that you submit late.
| Submission frequency | Penalty points threshold | Period of compliance |
|---|---|---|
| Annually | 2 | 24 months |
| Quarterly | 4 | 12 months |
| Monthly | 5 | 6 months |
If a penalty threshold is reached, you will receive a £200 penalty, plus a further £200 penalty for each subsequent late submission.
Your submission frequency will determine the penalty points threshold for late submissions.
Submission frequency
The following steps will allow you to reset your points to zero:
- Submit your returns on or before the due date based on the frequency of your submissions
- Make sure that HMRC has received all outstanding returns for the previous 24 months
If you do not pay your VAT on time
In the case of late payment penalties, the sooner you pay, the lower the penalty rate will be.
Up to 15 days overdue
Payment of your VAT owed in full or agreement of a payment plan on or between days 1 and 15 will not result in a penalty charge.
Between 16 and 30 days overdue
If you pay in full or agree to a payment plan on or between days 16 and 30, you will be charged a first penalty of 2% on your VAT owing at day 15.
31 days or more overdue
There will be a first penalty calculated at 2% on the VAT owed at day 15 plus 2% on the VAT owed at day 30.
For the duration of the outstanding balance, you will be assessed a second penalty of 4% per day. Payment plan agreements or full payment of the outstanding balance are used to calculate this amount.
Period of familiarisation
HMRC will not charge a first late payment penalty from 1 January 2023 until 31 December 2023, if you pay in full within 30 days of the due date.
How late payment interest will be charged
HMRC will begin charging interest on late payments on 1 January 2023, from the day your payment is overdue to the day your VAT payment is made in full.
A late payment interest rate is calculated by adding 2.5% to the Bank of England’s base rate.
Introduction of repayment interest
As of 1 January 2023, the repayment supplement will no longer be available.
HMRC will pay you interest on any VAT you owe for accounting periods beginning on or after 1 January 2023.
You will be charged the repayment VAT amount due to you in full from the day after the due date, or from the date of submission (whichever is later).
It will be calculated as the Bank of England base rate minus 1% for repayment interest. If the repayment interest calculation results in a lower percentage, the minimum repayment interest rate will always be 0.5%.