New VAT penalties and VAT interest charges 2023

New VAT penalties are coming in to place for 2023 aimed at punishing repeat offenders. This makes it more important now than ever to understand the VAT penalty changes and ensure your business is keeping up to date with your VAT returns and payments.

If you have any questions regarding VAT penalties or registering your Limited Company for VAT please get in touch on 0800 169 3278

VAT penalties

For VAT periods starting on or after the 1st of January 2023, a new penalty regime will apply for late VAT returns and for VAT that is paid late. There are also changes to how VAT Interest is calculated. 

Late returns

A new points-based system is in place from 2023. For each late return, you will receive one penalty point. Once the penalty threshold is reached, you receive a £200 penalty and a further £200 penalty for each subsequent late return.

The late submission penalty points threshold varies depending on if you submit monthly, quarterly, or annually.

Submission frequencyPenalty points thresholdPeriod of compliance
Annually224 months
Quarterly412 months
Monthly56 months

Late payment

Up to 15 days overdue

There is no penalty if you pay the VAT in full or agree to a payment plan on or between days 1 and 15.

Between 16 and 30 days overdue

There is a first penalty of 2% of the VAT you owe at day 15 if you pay in full or agree to a payment plan on or between days 16 and 30.

31 days or more overdue

There is a first penalty of 2% of the VAT you owe at day 15 plus 2% on the VAT you owe at day 30. There is a second penalty calculated at a daily rate of 4% per year for the duration of the outstanding balance. 

Late payment interest

HMRC will charge late payment interest from the day your payment is overdue to the day payment is made in full.

Late payment interest is calculated as the Bank of England base rate plus 2.5%.

These changes will only effect you if you are late or behind with your VAT returns or payments.  If this is you we can help! Get in touch on 0800 169 3278 and let’s get on top of the issue together

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