When is VAT Penalty Reform effective?
The VAT Penalty Reform starts on 1 January 2023.
How does the VAT Penalty Reform affect you?
The VAT Penalty Reform will apply to:
- VAT returns late submissions and
- VAT returns late payments.
Note: The VAT Penalty Reform will apply even if you have a nil or repayment VAT return.
Late VAT Submission Penalties
These work on a points-based system similar to when driving offences are committed.
Better understanding
To gain better understanding, examples with illustrations of:
- Late VAT Submission Penalties, and
- Late VAT Payment Penalties
have been provided in the Youtube video above.
Late VAT Payment Interests
Late VAT Payment Interests of 2.5% plus Bank of England base rate will be charged:
- from the date the VAT payments is overdue
- until the VAT is paid in full.
Period of familiarisation
HMRC allows a period of familiarisatio:
- First late payment will not be charged
- from 1 January 2023 to 31 December 2023
- if you pay in full
- within 30 days of your payment due date.
VAT Repayment Interest
VAT Repayment Interest is calculated as:
- Bank of England base rate minus 1%
- from the later of:
the date after the due date or
the date of submission
- until HMRC pays your business repayment VAT in full, and
- it is restricted to a minimum rate of 5%.
Leave in the comments below what you think of the VAT Penalty Reform. Are you ready for it?