New VAT late filing penalties

When to register for VAT

Now that all VAT-registered traders must submit their VAT returns using MTD compatible software (unless they have been granted an exemption), HMRC has introduced a new penalty regime to punish late filing. 

For VAT periods beginning on or after 1 January 2023, a point is awarded for each late VAT return. A £200 penalty is levied only when the appropriate points threshold is reached. Which depends on how regularly the return is filed:

• Quarterly returns: 4 points
• Monthly returns: 5 points
• Annual returns: 2 points

Taxpayers who file quarterly VAT returns will receive a £200 penalty when they submit the fourth VAT return late. Each subsequent late form will trigger another £200 late penalty. Until the points slate is wiped clean by a period of perfect compliance.

Perfect compliance means being up to date with all outstanding VAT returns and filing current VAT returns on time for 12 months (6 months for monthly returns, 2 years for annual returns). Where you have been in the habit of submitting your VAT return late. You won’t have suffered a penalty if there was no VAT to pay.

With the new VAT late filing penalties you won’t get away with this under the new points and penalties system, as points are awarded for late returns whether there is any VAT to pay or not.