As we prepare your vat returns we thought we would let you know that there are now new penalties for vat returns that are submitted late and paid late for vat accounting periods after 1/1/2023, this also now includes nil and repayment vat returns. The new penalty regime works on a penalty points basis meaning if you submit quarterly vat returns for each late vat return and late payment you would get a penalty point, so your penalty point threshold is 4 as shown below.
In addition to this new penalty regime HMRC has changed the interest regime on late vat payments which is calculated from the first day of the late payment at 2.5% above the Bank of England Base rate so it is now 6.75% interest rate. There are also late payment penalties which are 2% of the vat owed if still outstanding after 15 days.
We are therefore contacting you to make you aware of this in good time to avoid falling within this new penalty system and also to request that you submit your vat return information to us in good time to enable us to prepare your vat return calculations and returns. It would be extremely helpful if we could have your vat return information by the 15th day after your vat return period ends to enable us to prepare it in a timely manner and to let you know in good time if you have a vat payment.
The penalty point threshold for your accounting period
The penalty point threshold is set by your accounting period. The threshold is the maximum points you can receive.
| Accounting period | Penalty points threshold |
| Annually | 2 |
| Quarterly | 4 |
| Monthly | 5 |
Penalty example for a business making quarterly returns
A company submits their VAT Return quarterly. This means their penalty point threshold is 4.
They already have 3 penalty points because they submitted 3 previous returns late.
They submit their next return late and get a fourth penalty point. Because they’ve reached the penalty point threshold, they receive a £200 penalty.
The company submits their next return on time. They stay at threshold of 4 penalty points but do not get a £200 penalty.
The company submits their next return late. As they’re still at the penalty point threshold of 4 points, they receive another £200 penalty.
How to Remove all penalty points if you’re at the threshold
If you’ve reached the penalty points threshold and have the maximum points allowed for your accounting period, you can only remove them by meeting both conditions A and B.
A: complete a period of compliance, submitting all returns by the deadline.
B: submit all outstanding returns for the previous 24 months.