Proposed penalties for late VAT submissions and payments have been delayed until January 2023 to give HMRC sufficient time to bring in changes to infrastructure and systems. These changes impact anyone filing VAT returns late, but the Financial Secretary to the Treasury has recently announced that these changes won’t take effect until next year.
Changes to the default surcharge for VAT submissions
The changes brought forth from this new legislation will still go ahead, but not until 2023 to give HMRC time to set up systems to handle the changes. The default surcharge currently remains in place, but this will soon be replaced with three distinct penalties, including:
• A points-based penalty system for late VAT submissions
• Interest charges for late submissions
• Late payment penalties
All of the details for the initial changes remain the same, but the timeline has been extended by around 6 months to accommodate system updates at HMRC. This delay is actually quite beneficial as it decouples the changes from the Making Tax Digital for VAT extension which occurred in April 2022.
Moving forward, these new penalties will impact income tax self-assessment too. This is expected to take effect for the 24/25 tax year for individuals mandated for the Making Tax Digital self-assessments. For all other income tax self-assessments, these changes won’t take place until the 25/26 tax year.
As of yet, there is no additional legislation being brought forward to change the start dates as there aren’t any appointed day orders for penalty reform.
Who will this impact?
These changes will have an impact on any individual submitting VAT returns for accounts that start on or after January 1st 2023. All nil and repayment VAT returns that are late also fall under the scrutiny of the late submission penalty points and associated penalties. These penalties will work using a new points-based system, so for every VAT return that is submitted late, a single penalty point is issued. Upon reaching a certain threshold in points, you receive a £200 penalty and a further £200 penalty for every additional late submission.
The list below breaks down how the threshold works for late VAT submissions moving forward:
• For annual submissions: 2-point threshold with a 24-month period of compliance
• For quarterly submissions: 4-point threshold with a 12-month period of compliance
• For monthly submissions: 6-point threshold with a 6-month period of compliance
If you’d like to know more about the incoming changes to late VAT submissions and how they might impact you, contact our team of professionals at SRB Associates in Melton Mowbray today on 01664 503682.