VAT penalties in UK in 2023

VAT penalties in UK in 2023

Upon registering for VAT, all a business needs to do is file a VAT return and pay the tax office. A brief description of the VAT points system and the latest penalty system in the United Kingdom is provided in this article.

On 1 January 2023, the new VAT points system was introduced. Late filing of VAT returns and late payment of VAT will be penalized separately, as well as interest on late penalties.

In December 2022, specific guidance on fees related to overdue penalties and VAT interest was issued. 

Late filing of VAT returns

VAT returns will be penalized based on penalty thresholds determined by a new points system.

A business will lose one point each time it delays filing a return, until it reaches the penalty threshold and receives a £200 penalty.

Furthermore, businesses will also be fined £200 for each subsequent late filing.

Late payment of VAT

Payment of late fees early reduces penalty interest charges. 

  • Payment of VAT owed 1-15 days late or the same payment plan will not be penalized. 
  • If you are 16-30 days late, you will receive a first penalty of 2% of the VAT owed on the 15th day of late payment. 
  • In the case of a 31-day late payment, or a payment plan, a 2% penalty is added to the 15-day penalty. 
  • If the payment is over 31 days overdue, it must also be paid in addition to the first two fines. You will be charged another daily penalty of 4% per annum for the outstanding period. 

Period of familiarization

Until after 31 December 2023, you won’t be charged you a first late payment penalty to give you time to get used to the changes. This is provided that, within 30 days of your payment due date, you either:

  • Make a full payment
  • Arrange a payment plan

Reset of Points to Zero

Under the following conditions, it is possible to set the points to zero: 

  • Ensure that a business files its VAT return by the due date whenever a compliance period is due
  • Check that all outstanding tax refunds due to HMRC have been received

Our advice is to follow the regulations and always file and pay VAT on time in order to avoid any penalties. If you have any questions or need advice, please contact our experts, who will be able to assist you with your VAT filings and HMRC correspondence. Besides VAT registration, calculations, and filings, hellotax also provides tax-related support.

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