From 1 January 2023, HMRC began implementing their significantly updated HMRC VAT penalties regime. Late VAT filings and payments and filings are now treated separately. Fines will be proportionate to non-compliance.
These changes have been brought in to tackle the inconsistency in HMRC’s tax penalties. For example, you will incur an instant £100 late penalty fine for filing your annual self-assessment return one day late but filing a VAT return beyond its deadline does not lead to a charge.
VAT penalties for late filing will be a points-based system. Businesses will incur a point for each missed submission deadline. If a business receives four penalty points, they will be issued a £200 fine. After 2 years points will expire.
VAT penalties for late payments will be a percentage penalty based on the value of outstanding monies owed. There’ll be a 0% fine incurred if the outstanding liabilities are settled within 15 days of the due date, a 2% fine on the values of taxes owed after 15 days and a 4% fine on taxes owed after 30 days.
In addition, a 2.5% interest rate will be payable on top of the Bank of England base rate for late taxes.
To put yourself in the best stead to be compliant for these changes, you should ensure you have no outstanding VAT owed and fully reconcile your NIC payroll balances, so you do not have any outstanding liabilities. We recommend setting up a direct debit for your VAT with HMRC.
Specifically setting out set VAT penalties regime will make compliance easier long term, but you’ll need to be prepared. Speak to the VAT specialists at SFB on 03333 444 171 or enquiries@sfb.group if you would like to discuss the VAT penalty regime change in further detail.
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