HMRC’s new penalty system for late VAT returns and payments will be enforced from January 2023.
The current system
With the current system, HMRC can charge a financial penalty if you’re late with your VAT return or payment. First and second time offences will not usually result in a fine, but rather, a ‘suspended sentence’. If you are late for a third time, the fine will stand.
The new system
The new system will have a more stringent structure in place. This new systematic approach introduces a 2% penalty for VAT payments not settled within 15 days of the due date, and a further 2% after 30 days. Additionally, an annual penalty rate of 4% will be applied to unpaid VAT.
Interest charges have also been introduced at a rate of 2.5% above the Bank of England base rate.
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