New VAT penalty regime in play from January 2023

New VAT penalty regime in play from January 2023

In January 2023, the way VAT penalties for late filing and payment is changing. I won't bore you with how this operates at the moment, because, well, there's no real reason to know. But here's the skinny on how it'll operate from next year:

 Late Filing Penalties

 In order to introduce a "fairer system" the penalties for late filing will be points based. Every time you submit a return late, you'll receive 1 point. Once you hit four points, you get hit with a £200 penalty.  For each subsequent late return it's another £200 penalty.  Any points on your "account" will be expunged after 12 months if you continue to file returns on time.  These figures are for quarterly filing which is how the vast majority of small businesses file their returns. If you are on an annual scheme, you can only accrue two points, and the points are expunged after 24 good months. If you file monthly, you can accrue five points, and the points come off after just six months.  

 Late Payment Penalties

 If you pay up to fifteen days late, then there's no penalty.  If you're late between sixteen and thirty days the penalty is 2% of the amount owed.  On day thirty another 2% is added.  From day 31 it's a daily penalty calculated at 4% per annum (0.11% per day)  Interest will also be charged from the due date at base plus 2.5% as usual.  

 Avoiding Penalties

 Obviously filing and paying on time is the best way to avoid penalties. But if that's not possible, contacting HMRC to arrange a Time To Pay Agreement is vital. It's important when arranging a TTP that you are realistic in your proposals. If you don't keep up with the payments, things can get very sticky. It makes sense to calculate your affordability alongside a full cash flow forecast. It also makes sense to seek professional assistance when doing this.  As always, getting out in front of the problem, is the best way. If you think you may need some help, please contact Acumenica for a free consultation. We will discuss your options in an entirely confidential, non-judgmental, pragmatic, friendly way.


Visit our Contact Page to get in touch. Or you can email This email address is being protected from spambots. You need JavaScript enabled to view it. or call 03330 166559.