VAT: New Penalty Regime
Posted on 19th October 2022 at 09:50
A new VAT penalty system will be introduced from 1 January 2023. HMRC has announced a special twelve-month concession for one part of the new rules. What will this mean for your business?
The VAT default surcharge regime will end on 31 December 2022 and a new penalty system will apply for VAT periods beginning on or after 1 January 2023.
There will be two different penalty regimes, one for paying your VAT returns after the due date and a separate system for submitting your returns late.
The new system will not charge you a penalty if you fully pay your VAT bill within 15 days of the due date. A 2% penalty will then be charged for tax paid between days 16 and 30, with a further 2% penalty payable on tax still owing after 30 days. There will also be late payment interest charged for all tax unpaid by the due date, based on the Bank of England base rate plus 2.5%.
As with the current default surcharge system, you will not be charged a penalty or surcharge if you agree a time to pay deal with HMRC before the relevant trigger dates. But interest will still accrue from day one.
The current system only charges for late payments. That will change on 1 January 2023, with the introduction of a new points-based system for late returns. Points and penalties will also apply to late repayment returns. You will get one point for each late return you submit; if you submit quarterly returns, you will usually receive a £200 fixed penalty when you reach four points.
If you fully pay your tax within 30 days of the due date, you will not be charged a penalty for the first twelve months of the new regime, i.e. no 2% penalty for tax paid between days 16 and 30. For periods beginning on 1 January 2024 and later, the 2% penalty will then apply for tax unpaid by day 16.
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