HMRC is introducing a new VAT penalty regime from 1 January 2023, replacing the current default surcharge with a fixed rate, points based system for late VAT submissions and payments.
The changes will affect businesses submitting VAT returns for accounting periods starting on or after 1 January 2023.
A single penalty point will be issued for each late submission of a VAT return.
If a business exceeds the points threshold, they will receive a £200 penalty, and a further £200 penalty for each subsequent late submission.
Businesses will be able to reset their points back to zero once all their returns have been filed and there has been a continuous period of good compliance.
The new points thresholds are as follows:
| Submission frequency | Penalty points threshold | Period of compliance |
| Annually | 2 | 24 months |
| Quarterly | 4 | 12 months |
| Monthly | 5 | 6 months |
HMRC said there will be a "period of familiarisation" for the first year:
"To give you time to get used to the changes, we will not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, if you pay in full within 30 days of your payment due date."
Talk to us about your VAT returns.
