New VAT penalties and interest charges will apply to everyone who submits a VAT Return from 1 January 2023.
The changes will affect everyone submitting VAT returns for accounting periods starting on or after 1 January 2023. Adding to this, any nil or repayment VAT returns received late will also be subject to late submission penalty points and financial penalties.
What happens if you submit your VAT return late?
- Late submission penalties will work on a points-based system.
- For each VAT Return you submit late you will receive one late submission penalty point.
- Once a penalty threshold is reached, you will receive a £200 penalty and a further £200 penalty for each subsequent late submission.
The late submission penalty points threshold will vary according to your submission frequency.
| Submission frequency | Penalty points threshold | Period of compliance |
| Annually | 2 | 24 months |
| Quarterly | 4 | 12 months |
| Monthly | 5 | 6 months |
To reset your points back to zero you must:
- Submit your returns on or before the due date for your period of compliance — this will be based on your submission frequency
- Make sure all outstanding returns due for the previous 24 months have been received by HMRC
What happens if you submit your VAT return late?
For late payment penalties, the sooner you pay the lower the penalty rate will be. There will however be a period of familiarisation to give businesses time to get used to the changes. HMRC will therefore not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, if you pay in full within 30 days of your payment due date.
How will late payment interest will be charged?
From 1 January 2023, HMRC will charge late payment interest from the day your payment is overdue to the day your payment is made in full. For each VAT Return you submit late you will receive one late submission penalty point. Once a penalty threshold is reached, you will receive a £200 penalty and a further £200 penalty for each subsequent late submission.
The late submission penalty points threshold will vary according to your submission frequency.
Introduction of repayment interest
The repayment supplement will be withdrawn from 1 January 2023. Instead, for accounting periods starting on or after 1 January 2023, HMRC will pay you repayment interest on any VAT that you are owed. This will be calculated from the day after the due date or the date of submission (whichever is later) and until the day HMRC pays you the repayment VAT amount due to you in full.
Next steps
More detailed guidance about the changes to VAT late submission penalties, late payment penalties and VAT interest charges will be published by HMRC later this month and we will update you when available.
If you have any concerns or queries relating to this matter, please contact Mariske Byrnes or your usual BM Connect adviser.
