Newsroom, VAT | 26. January 2023

VAT sanctions in Great Britain, 2023

The UK introduced a new VAT points system on 1 January 2023, which penalises late filing of VAT returns and late payment of VAT. Specific guidance on charges relating to late payment penalties and VAT interest was published in December 2022. by

Late filing of VAT returns

VAT returns will be penalised based on thresholds determined by the new points system. Businesses will lose one point each time they delay filing a return until they reach the penalty threshold and receive a £200 penalty. In addition, companies will be fined £200 for each additional late filing.

Late payment penalties for VAT payments: How to avoid penalty interest

Early payment of late fees reduces the penalty interest. No penalty interest is charged for payment of VAT due 1–15 days late or under the same payment plan. For late payments of 16–30 days, an initial penalty of 2% of the VAT due will be charged on the 15th day of late payment. If payment is 31 days late or on a payment plan, a further penalty of 2% will be added to the 15-day penalty. If the payment is more than 31 days overdue, it must be paid in addition to the first two penalties. A further daily penalty of 4% per annum is levied for the outstanding period.

VAT points: How to set it to zero and what it means for businesses

Under certain conditions, it is possible to set the points to zero. These include ensuring that a business submits its VAT return on time when a compliance period is due and checking that all due tax refunds to HM Revenue and Customs (HMRC) have been received.

It is important to note that the new VAT points system and penalty regimes in the UK in 2023 can have severe consequences for businesses that must submit or make their VAT returns and payments on time. Companies should therefore ensure that they comply with all legal requirements to avoid penalties and fines.


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