New penalty regime for late VAT returns

The 1^st January 2023 sees the start of a new penalty regime for those who submit a late VAT return. The system uses a points-based approach, as opposed to the previous Default Surcharge system.

These new rules will not apply to a return if it is:

• The 1^st VAT return for a new registration
• The Final VAT return when you cancel your registration
• One-off returns covering a timescale different to a month, quarter or year (say a return of four months which might happen when there’s a change in your VAT Return cycle)

But it would cover a Nil VAT Return or a Repayment Return.

Late payments of VAT are caught under the same rules.

At a time when cashflow challenges exist for many, it’s essential to look at whether your VAT processes and the environment you operate in, can offer VAT benefits to ease cashflow pressures – opportunities can exist, it’s a question of their relevance to your organisation. HMRC’s ongoing mantra is to ensure taxpayers pay the “Right Tax at the Right Time” and this new penalty regime does offer a more proportionate outcome than the previous model, they would argue. However, a £200 penalty is still £200 lost.

If you’re worried about managing your VAT liabilities and payments to HMRC you can get on the front foot with HMRC by agreeing a “time to pay” payment plan – if VAT issues prove a challenge in 2023 then contact our team on the form below.

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