Business news

New VAT penalty regime starts from 1 January

HMRC is introducing a new VAT penalty regime from 1 January 2023, replacing the current default surcharge with a fixed rate, points based system for late VAT submissions and payments.

The changes will affect businesses submitting VAT returns for accounting periods starting on or after 1 January 2023.

A single penalty point will be issued for each late submission of a VAT return.

If a business exceeds the points threshold, they will receive a £200 penalty, and a further £200 penalty for each subsequent late submission.

Businesses will be able to reset their points back to zero once all their returns have been filed and there has been a continuous period of good compliance.

The new points thresholds are as follows:

Submission frequency Penalty points threshold  Period of compliance 
 Annually 24 months 
Quarterly  12 months 
Monthly  6 months 

HMRC said there will be a "period of familiarisation" for the first year:

"To give you time to get used to the changes, we will 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."

Talk to us about your VAT returns.

Get in touch today

Speak to one of the team to find out more about our approach