In the Spring 2021 Budget, the government announced that there would be changes to the way penalties are incurred on late VAT return submissions and/or payments from 1st April 2022. The current system for late filing of a VAT return imposes a Surcharge Liability Notice (SLN) on the business for 12 months from the date of the overdue return. This means that any additional late submissions or payments in that 12 month period attract a surcharge which is a % of the total VAT liability, starting at 2%, then increasing for each late submission, capped at 15%.

The new scheme being implemented for VAT quarters starting on or after 1st April 2022 will be split into two charges; one for late submission of return and one for late payment of VAT.

Late submission:

From 1st April 2022, late submission of VAT returns will be charged on a ‘points based’ system, meaning that every late return will incur 1 ‘point’. For VAT returns filed quarterly, the business will not be charged any penalties until 4 points have been accrued in a 12 month period, if this is exceeded then a £200 penalty will be charged for each additional point that is incurred from then on. If 1 point is incurred for late filing and then within a 12 month period none other returns are submitted late then the points will expire.

Late Payment:

For late payment of VAT returns starting on or after 1st April 2022, the penalty will be calculated on a percentage of your VAT liability. If the VAT liability is paid within 15 days of it being overdue then no penalty will be charged. If paid between day 16 to 30 of being overdue then a 2% charge of the outstanding balance will be added to the bill. If the tax remains unpaid 31 days after becoming overdue then additional interest will be accrued daily based on 4% per annum.

Time to pay arrangements (TTP) will be accepted still by HMRC providing they are arranged within 30 days of the liability falling due.

If you have any questions, please contact us today!