United Kingdom: HMRC releases guidelines on VAT penalties and interests for 2023

HRMC released the guidelines on VAT penalties and interest when submitting VAT return for a specific accounting period on or after 1 January 2023. The changes are intended to make the penalties and interest system simpler and more distinct.

The penalty regime is detailed as follows for late submission and late payment:

• Penalty points and penalties if you submit your VAT Return late

Accounting period Penalty points threshold:

EUR 200 penalty will be imposed once the penalty point threshold is reached. Another EUR 200 penalty for each subsequent late submission while you are at the threshold.

• Overdue payment interest if you do not pay VAT or penalties on time

From the first day a payment is past due until the day it is fully paid, overdue payment interest is assessed. It is computed at the base rate additional 2.5% of the Bank of England.

• Repayment interest on VAT credits or overpayments

Repayment interest is calculated at a rate of 1% below the Bank of England base rate, with a minimum rate of 0.5%. This will not be paid by HMRC if there are any outstanding VAT returns. It will be paid from the date that HMRC receives the final outstanding VAT return.

• How overdue payment penalties work if you pay VAT late

Overdue payment penalties can apply to any payments of VAT not paid in full by the relevant due date except:

• VAT payments on account
• Installments for the VAT Annual Accounting Scheme

• Remove penalty points you have received after submitting your VAT Return late

If you have reached the penalty point threshold and have accumulated the maximum number of points for your accounting period, the only way to have them removed is by fulfilling both of the following conditions:

• Submitting all returns by the deadline for a period of compliance and
• Submitting all previously outstanding returns for the preceding 24 months

Source: gov.uk

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