VAT penalties – New rules
- Author Mark Hewitt
- Published March 11, 2023
- Word count 480
The VAT default surcharge is being replaced with a new VAT penalty and interest regime.
The new rules apply to VAT accounting periods beginning on or after 1 January 2023.
Late filing penalties
The new penalty regime operates on a points-based system. Each VAT return received late, including nil and repayment returns, will receive one late submission penalty point.
A penalty will be charged when the points reach a certain threshold.
The penalty trigger depends on the frequency with which returns are submitted.
Submission frequency: Annually
Penalty points threshold: 2
Period of compliance: 24 months
Submission frequency: Quarterly
Penalty points threshold: 4
Period of compliance: 12 months
Submission frequency: Monthly
Penalty points threshold: 5
Period of compliance: 6 months
Once the penalty threshold is reached, a penalty of £200 is charged.
Further penalties of £200 are charged for each subsequent late submission.
The points total can be reset to zero if all returns are submitted on or before the due date for the period of compliance and all returns due for the previous 24 months have been submitted to HMRC.
Late payment penalties
A penalty may also be charged if VAT owed to HMRC is paid late.
The penalty depends on how late the payment is made.
No penalty is charged if payment is made within 15 days of the due date. If payment is made between 16 and 30 days after the due date, a penalty equal to 2% of the VAT owing at day 15 is charged.
Where payment is made 31 days or more after the due date, the penalty charged is equal to 2% of the VAT owing at day 15 plus 2% of the VAT owing at day 31. Where a time to pay agreement is agreed, penalties are calculated by reference to the date on which the arrangement is made.
A further penalty is charged when the balance is cleared or a time to pay arrangement agreed. This is calculated at a daily rate of 4% a year for the duration of the debt.
To allow traders time to become familiar with the new rules, late payment penalties will not be charged during the first year (1 January 2023 to 31 December 2023) where payment is made in full within 30 days of the due date.
Late payment interest
From 1 January 2023, late payment interest will be charged on late paid VAT from the due date until the date payment is made in full. Late payment interest is charged at a rate equal to the Bank of England bank base rate plus 2.5%.
Repayment interest
The repayment supplement is withdrawn from 1 January 2023. Instead, for accounting periods beginning on or after 1 January 2023, HMRC will pay repayment interest on VAT that they owe. The interest period will run from the due date (or date the VAT was submitted if this is later) to the date that payment is made in full by HMRC.
Repayment interest is paid at a rate equal to the Bank of England base rate minus 1%, subject to a minimum rate of 0.5%.
Mark Hewitt is a Chartered Accountant who has been in public practice for 29 years. We provide vital services to small businesses. You can contact us at mark@truemanbrown.co.uk or at https://truemanbrown.co.uk.
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- How to Get Tax Residency in Bulgaria
- The Advantages of Incorporation for Realtors: Safeguarding Your Financial Future
- 10 essential tax-saving strategies for landlords: Maximise your rental income
- A Comprehensive Guide to Navigating the Process and the Role of Customs Brokers in the UK
- Outsourced Accounting Services for UK Businesses: A Cost-Effective Solution for Financial Management
- Top 8 Self Assessment tax return software
- How to Close a Limited Company in the UK
- Maximizing Your Finances: Unleashing the Power of CPA Services
- TAX-FREE STRATEGIES IN AN UNCERTAIN ECONOMY
- 2022 Energy crisis and failure to connect Reality.
- When Are Corporate and Personal Taxes Due in Canada in 2021?
- You Would Never Have Thought That Having Accounting Internship Could Be So Beneficial
- ACTIVATION OF UAN
- Focal motivations behind getting a Tax direct for Small Business Firms
- Avoiding the flood — tax issues with water rights in agribusiness
- Social security benefits for a family (COVID-19)
- How to use QuickBooks Component Repair Tool?
- Do you want to reduce your taxes for next year?
- Will you be responsible with your tax refund?
- Getting started with QuickBooks Enhanced Payroll in Brief
- Are DSTs Right For Your 1031 Exchange
- Tax Return Makeovers By Kenya Woodard
- Why have all crypto tax attempts failed?
- Are You a Corporation? Know Why Consulting a Tax Accountant Is Vital
- Share capital or share premium for your Dutch company?
- Everything investors should know about 1031 sponsors
- Why is the income tax so high in UK?
- Should I do my own tax return?
- Get More Money Back on Your Tax Return with help from the Tax Cuts and Jobs Act