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VAT return/payment late?

Updated: Mar 14

Abell tech team explain:-

HMRC have kindly dived in to the 'reducing red tape' agenda of the current HM Government. From 1st January 2023 we have a new regime for touching you up for extras should you now send stuff in a nano-second late.

Late filing of the Return

Now it's just like speeding - the more you do it the more points you get, and what do points mean? PENALTIES

Taxpayers receive a point for each VAT return filed late. Once the taxpayer’s total number of points reaches 4 for quarterly, or 5 for monthly returners you get a fixed £200 penalty, and for each subsequent return,

Points expire once 24 months old, unless you're naughty again, in which case it keeps rolling on,.... And of course HMRC have the option to extend your penalty period if they're fed up with your non-compliance record.

There is no connection between the amount of any late filing penalty and the VAT due. So note that repayment traders e.g. Exporters, and even filing nil returns, will be in the filing penalties regime for the first time. So of course M Assive plc won't care about the penalty whereas T Inyshop Ltd will care a lot, and guess who's got a massive accounts department with whizzy PCs to do the return quickly?

Late payment

There will now be two penalties, based on how late the payment is:

The first penalty is 2% of the VAT unpaid at day 15, and a further 2% of the VAT unpaid at day 30. I.e. 4% if you are a month late.

The second penalty starts at day 31, runs charged daily, based on an annual rate of 4% of the outstanding tax amount. (lots cheaper).

Which businesses pay bills weeks late habitually? M Assive plc who won't care about the penalties. Whereas Mr./Mrs./Ms. O Pressed at T Inyshop Ltd faces significant costs to him/her/it if he/she/it pays late, and guess who's got a massive accounts department with whizzy PCs to fob off paying bills promptly?

It's great that HM Government thought this all through very carefully, otherwise it could have come out unfair to small businesses.

If you call HMRC and agree a Time to Pay (TTP) arrangement this is treated in the same way as 'payment', with the penalty regime grinding to a halt on the date of the TTP application. If subsequently the terms of your TTP are breached, it will be treated as if it never existed and full penalties will be charged, so this could be a really expensive hit. So once you're within a TTP monitor yourself really carefully, and never miss a payment.

This is harder than it seems, as the TTP boys will be desperate to have a direct debit so they can take what they fancy whenever they fancy out of your holiday fund.

However should you commit the heinous crime of not having enough dough in your account to meet the DD when they choose to take the cash, IT'S YOUR FAULT. Usually the DD will collapse due this, and the first you will know about it is weeks later when you get a sly letter from HMRCy giving you the 'good' news that your TTP has been cancelled due to your fault (not theirs). THEY WILL NOT RING YOU to chat before doing it.

If it's looking hard, just call them up and speak to a nice Scottish guy who will offer you another deal. Of course don't ring up for another TTP if you're fiscally bogged down in one already.

You actually have until day 15 after the tax due date to request the TTP, and avoid any penalties.


Are you interested? You will be in future.

Late payment interest for VAT will be in same system as other taxes, charged at the Bank of England base rate plus 2.5%.

If you are ever due a VAT refund, and it's received late by you, astonishingly, HMRC will not pay the same rate of interest back, you just get Base less 1%. So overall HMRC make a 3.5% margin on tax flows?

Admin Suggestions

Stop ignoring all those pesky emails from your accountants pestering for bank statements, and vat data every 10 minutes. Most accountants receiving data at the last minute will feel little oomph to rush and get your return done by the deadline, so you need to give them a nice warm feeling by co-operating, and handing over all the data in good time, and not just the bits you fancy, in future.




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