2023 has arrived, bringing a new way of penalising late filing and payments of VAT. From 1 January 2023, HMRC is charging interest on all late payments. There is now a fixed rate, points-based penalty system for VAT submissions too.
“The new approach to late VAT payments and submissions is more complex than the old one,” explains Emily Bridges of re:accounts in Stevenage. “However, on a positive note it’s fairer too.”
Penalty Points for Late Submissions
A single penalty point will be submitted for each late submission of a VAT return. When the points threshold is exceeded a fixed penalty of £200 will be issued.
The threshold applies to any two-year period and varies according to how often VAT returns are submitted:
- Annual returns – two points
- Quarterly returns – four points
- Monthly returns – five points
The scheme offers the chance to reset penalty points to zero when all returns have been filed and a period of good compliance has been achieved. Therefore, those who consistently file late will incur charges whereas occasional late submissions or ‘one off’ administrative errors will not be penalised. The period of good compliance varies according to how often you should submit your VAT return:
- Annual returns – 24 months
- Quarterly returns – 12 months
- Monthly returns – 6 months
Charges for Late Payments
Under the old rules, businesses were often hit with large surcharges of between 2% and 15% for simply being one day late. In fact, this could be due to a one-off administration error or banking delay rather than a knowingly late submission.
The new system will operate three types of charges for late VAT payments:
- an initial two-part fixed rate penalty for late payments of 2% and 4% (applying to the first 15 and 30 days);
- ongoing 4% daily interest-based penalty (applying after 30 days); and
- interest charged at 2.5% above the Bank of England base rate (applying from the outset).
Gentle Introduction
HMRC has announced it will apply a “light touch” for the first year of operation. Specifically, where a business is doing its best to comply, HMRC will waive the first 2% fixed penalty for VAT periods up to the end of 2023.
Do you think you’ll be affected by the new HMRC regime?
Are your VAT returns and payments submitted late?
Avoid potential financial penalties. Talk to the friendly experts at re:accounts in Stevenage. We’ll help you keep on top of your cash flow, returns submissions and tax payments, including VAT. We’re here to help.
