7th November 2022
For VAT returns for accounting periods starting on or after 1 January 2023 the new payment penalty system is to be replaced by a points-based late filing penalty regime and a new late payment regime.
The new penalty points system for late VAT returns is intended to be less punitive where the taxpayer misses the occasional deadline. The new system will penalise those who persistently miss their submission obligations and not those who make occasional mistakes.
The point system will work as follows:
A penalty will be charged when the total points equal these thresholds:
The penalty points that you have accumulated will not automatically expire once you have triggered a penalty. Instead, to reset the clock you must meet a test of good compliance period that will depend on the return cycle (please see below) and submit any outstanding returns due in the prior 24 months.
Good compliance period:
The new penalty system will apply in two stages – fixed penalties and daily penalties. For late payment penalties, the sooner you pay the lower the penalty rate will be. The penalties will be as follows:
Where a business has overpaid tax, interest on overpaid tax being repaid will be at Bank of England base rate less 1%.
To give time to get used to the changes, HMRC will not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, provided all the tax owed on a return is fully paid within 30 days of the payment due date.
Obviously submitting the return and paying the VAT on time is the best way of avoiding the extra cost. But some tips to avoid a penalty include:
If you need help managing your VAT returns or would like to talk to us about how to improve your bookkeeping and VAT systems, then contact Katrina now.
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