HMRC have announced a reform of the current penalty system relating to late submission of VAT returns and late payment of VAT liabilities. Instead of an automatic financial penalty being applied to taxpayers who fail to meet their obligations in either of these areas, points will be accrued depending on the error involved. Based on the accumulation of a certain number of points, a financial penalty will be charged.
The application of this points-based system, which will come into effect starting April 2022, is intended to proportionally affect VAT registered traders who miss these deadlines on a regular basis, as opposed to those who default occasionally.
Once in effect, under this new systems traders will receive a point for every submission/payment deadline missed and once a pre-determined points threshold has been reached a financial penalty of £200 will be applied.
The relevant point thresholds will vary depending on required submission frequency – for example for traders submitting returns on an annual basis, accruing 2 points will incur a penalty, whereas for quarterly submissions the threshold is set at 4 points.
To ensure that your business does not fall foul of this new penalty regime, please speak to a member of our VAT department today!