HMRC’s latest statement surrounding VAT penalties and VAT interest changes details that for VAT periods starting on or after 1 January 2023, the default surcharge will be replaced by new penalties if the submission, or payment is late.
The changes will affect everyone submitting VAT Returns for accounting periods starting on or after 1 January 2023.
It is worth noting that any nil or repayment VAT returns received late will also be subject to late submission penalty points and financial penalties.
Late submission penalties will work on a points-basis system, meaning that for each VAT Return submitted late, you will receive one late submission penalty.
Once a penalty threshold is reached (as detailed in the table below) you will receive a £200 penalty, as well as a further £200 penalty for each subsequent late submission.
The late submission penalty points threshold will vary according to your submission frequency (as detailed below).
|
Submission frequency |
Penalty points threshold |
Period of compliance |
|
Annually |
2 |
24 months |
|
Quarterly |
4 |
12 months |
|
Monthly |
5 |
6 months |
HMRC will allow you to reset your points back to zero if you:
-
Submit your return on or before the due date for your period of compliance – this will be based on your submission frequency
-
Make sure all outstanding returns due for the previous 24 months have been received by HMRC
Late Payments
The sooner you pay your late payment penalty, the lower the penalty rate will be. If payment is up to 15 days overdue you will not be charged a penalty providing that you pay the VAT you owe in full or agree a payment plan on, or between days 1 and 15.
If your payment is between 16 and 30 days overdue, you will receive a first penalty calculated at 2% on the VAT you owe at day 15. This is only if you pay in full or agree a payment plan on or between days 16 and 30.
If your payment is 31 days or more overdue, you will receive a first penalty calculated at 2% on the VAT you owe at day 5, plus 2% on the VAT you owe at day 30. You will also receive a second penalty calculated at a daily rate of 4% per year for the duration of the outstanding balance. This is calculated when the outstanding balance is paid in full or a payment plan is agreed.
For the first year (from 1st January 2023 – 31st December 2023) HMRC will not be charging for a first late payment penalty, if you pay in full within 30 days of your payment due date.
From the 1st January 2023, HMRC will charge late payment interest from the day your payment is overdue to the day your payment is made in full. Please note that late payment interest is calculated at the Bank of England base rate plus 2.5%.
The repayment supplement will be withdrawn from 1st January 2023. For accounting periods starting on or after 1st January 2023, HMRC will pay you repayment interest on any VAT that you are owed. This will be calculated from the day after the due date or the date of submission (whichever is later) and until the day HMRC pays you the amount due to you in full.
Repayment interest will be calculated at the Bank of England base rate minus 1%. The minimum rate of repayment interest will always be 0.5%, even if the repayment interest calculation results in a lower percentage.
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