The new VAT penalty system for the late submission of VAT returns has now been delayed by nine months to January 2023.
The regime will now apply to VAT return periods that start on or after 01 January 2023.
The scheme was due to come into effect from 1 April 2022, with the additional time ensuring that the IT changes for the new penalties and interest charges can be introduced as effectively as possible.
The extension of the regime to Income Tax Self Assessment (ITSA) is still intended to take place as originally planned – from April 2024 for Making Tax Digital taxpayers and April 2025 for all other taxpayers in ITSA.
New penalties will replace the existing Default Surcharge system and have been designed to harmonise the penalty systems for late filing and payment across the taxes that HMRC manage.
Although VAT repayment claims will not be subject to late payment penalties, they will be subject to the late filing penalties, and so this new system will impact on all VAT registered businesses.
Late submission penalties
When a taxpayer misses a submission deadline, they will incur a point. A fixed financial penalty will become chargeable once the taxpayer has reached the points threshold, HMRC have advised this will be £200.00.
The level of points threshold is based upon the frequency of the taxpayer’s submissions:
- Monthly – 5 points
- Quarterly – 4 points
- Annually – 2 points
Further fixed rate penalties will be issued if the taxpayer continues to miss submission deadlines. They will become liable to an additional fixed rate penalty, each time a filing deadline is missed.