New VAT Penalty Regime 2023

For VAT accounting periods starting on or after 1 January 2023 there are new penalties for VAT Returns that are submitted late and VAT which is paid late. The way interest is charged has also changed.

If you submit late, you’ll face late submission penalties. They work on a points-based system. Each late return attracts a penalty point until you reach the penalty point threshold.

When you reach the threshold, you’ll receive a £200 penalty. You’ll also receive a further £200 penalty for each subsequent late submission while you’re at the threshold.

For quarterly returns, the threshold is 4 points. Penalty points remain in force for 24 months.

If you pay late, you’ll be charged late payment interest. This is charged from the first day that the payment is overdue until the day it’s paid in full. It’s calculated at the Bank of England base rate plus 2.5%.

If your payment is more than 15 days overdue, you’ll be further charged a late payment penalty. This is calculated as 2% of outstanding VAT. After day 31, a further 2% is levied.