VAT Penalties and Late Charges from January 2023
HMRC is changing the structure of fines and penalties for late filing or payments of VAT from January 2023. This is only applicable for VAT periods commencing on 1 January 2023 and any existing arrangements will continue outside of the new regime changes.
For late submission of VAT returns, there will be a points system in place and when the threshold is reached there will be a £200 penalty and a further £200 for each subsequent late filing within the period of compliance. The points are as follows:
| Points | Period of Compliance | |
| Annual | 2 | 24 months |
| Quarterly | 4 | 12 months |
| Monthly | 5 | 6 months |
If you have failed to file your quarterly VAT return on time on four occasions you will then incur a £200 fine and will have to file on time for the next 12 months to reset the parameters. If you fail to do this then you will have a further £200 fine and have to file on time for the subsequent 12 months.
Failure to pay VAT incurs different penalties. Ordinarily, you should pay VAT on the 7th day of the 2nd month after the VAT period (to allow for HMRC to receive funds by 10th). There will be a 15-day grace period if you pay in full or agree on a payment plan with HMRC without any interest. Between days 16 and 30 there is a 2% penalty of the VAT liability IF payment is made in full or an agreement of a payment plan is in place.
If there is still an amount overdue from Day 31 there will be a 2% penalty of the amount owing from Day 15 PLUS a further 2% of the amount owing on Day 30. There will also be a further 4% penalty for the duration of the outstanding balance. For the transition period to 31 December 2023 the first late penalty charge will not apply.
In addition, interest will be charged at 2.5% above the Bank of England base rate until the outstanding payments are made in full.
In the event that HMRC do not reimburse repayments by the due date they will be liable for a repayment supplement which will be at the rate of 1% below the Bank of England base rate subject to a minimum of 0.5%.
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