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Penalty Point System – VAT (Update 01/01/2023)


Penalty Point System – VAT (Update 01/01/2023)


  • The new penalty system is a point-based system (like when you’re driving)
  • Each time your VAT return is filed late, you will receive a penalty point
  • Penalties will be charged at different rates based on when the data is received
  • This change was implemented from 1st January 2023

Late submission penalties

  • There will be a fixed penalty of £200.00 once a penalty threshold is reached
  • The thresholds are as follows:
    • Annual Returns – 2 points
    • Quarterly Returns – 4 points
    • Monthly Returns – 5 points
  • An additional £200.00 penalty will be added every time you are late to file your return after the threshold is reached

How/when points are removed

  • Points can be removed once 2 conditions are met:
    • A period of compliance – you will need to reach a length of time where you have completely complied with the submission rules, this time depends on how often the returns are submitted:

Annual Returns – 24 months

Quarterly Returns – 12 months

Monthly Returns – 6 months

  • All VAT returns due in the last 24 months have been received from HMRC
  • Once these 2 conditions are met, the points will be removed, and you will be back at 0
  • Points will also automatically expire after 24 months

Late payment penalties

  • Late payment penalties will depend on when the payment is made. Please see below:
  • The penalty for the boxes highlighted in red is calculated as follows:
    • The penalty amount on day 31/365 days (1 year) x the amount days till the payment is made from the 31st day

Period of familiarisation

  • There is a period of familiarisation which started 1st January 2023 and will end on the 31st of December 2023. See below:

Late Payment Interest

  • A late payment interest will be applied
  • This will be calculated at a rate of 2.5% plus the Bank of England base rate
  • It will be charged from the day the payment is overdue (8th) until the day it’s paid in full
  • Late payment interest would also apply to late submission and late payment penalties if they are paid after 30 days
  • See an example below:
  • The late payment interest is calculated as follows:
    • The amount due to HMRC / 100 x the interest rate. That amount is then /365 days (1 year) x the amount days of till the payment is made from the 8th

Repayment Interest

  • A late repayment interest will be applied to HMRC that will be owed to you
  • This will be calculated at the Bank of England base rate minus 1%, with a minimum rate of 0.5%
  • It will be calculated from the day after the due date or the date of submission (whichever is later) until the date a repayment is issued
  • See an example below:

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