VAT penalties and interest are to be introduced from Jan 2023

Once the penalty threshold is reached, a customer will receive a £200 penalty and a further £200 penalty for each subsequent late submission. 

 

VAT Submission frequency Penalty threshold 

Annual 2 points 

Quarterly 4 points 

Monthly 5 points 

 

For eg:- If a VAT registered person having quarterly filing frequency does not file his VAT returns in time for 4 quarters, as soon as he defaults in the 4th quarter he will be issued a penalty of £200. 

 

Note – Customers filing their VAT repayment (refund) or nil returns after the due date shall also receive penalty points. 

 

There shall be penalties on late payments of VAT as follows 

 

 

There will be no penalty charged if you pay the VAT you owe in full or agree a payment plan on or between days 1 and 15 after the due date. 

 

 

You will receive a first penalty calculated at 2% on the VAT you owe at day 15 if you pay in full or agree a payment plan on or between days 16 and 30 after the due date. 

 

 

You will receive a first penalty calculated at 2% on the VAT you owe at day 15 plus 2% on the VAT you owe at day 30 after the due date. You will receive a second penalty calculated at a daily rate of 4% per year for the duration of the outstanding balance. This is calculated till the date the outstanding balance is paid in full or a payment plan is agreed. 

 

 

To give you time to get used to the changes, HMRC will not be charging a late payment penalty for the first year from 1 January 2023 until 31 December 2023, if a taxpayer pays the VAT amount full within 30 days of the payment due date. 

 

 

From 1 January 2023, HMRC will charge late payment interest from the day your payment is overdue to the day the VAT payment is made in full. 

Late payment interest is calculated as the Bank of England base rate plus 2.5%