What happens if you submit a late VAT return?

If you have a growing VAT-registered business, then staying on top of your VAT returns should be at the forefront of your mind unless you employ the support of an experienced accountancy firm that specialises in VAT matters.

HMRC states that since 1 January 2023, anyone who submits a late VAT return will receive a penalty point on their account. The points-based system differs depending on your accounting period, but when you max out the number of points you can receive, you will be charged a £200 financial penalty.

In this blog, we’ll explore the new penalty regime, how the points system works and what to do if you submit your VAT return late.

If you are looking for professional advice about your VAT-registered business, then contact AudTax today. Our expert team of accountants have a broad knowledge of UK tax law and can help you understand the difficulties surrounding VAT.

What is the new penalty regime in the UK?

As of 1 January 2023, the new penalty regime in the UK works on a points-based system, which means that for each late VAT return, you’ll get one penalty point. These points add up until you reach the penalty point threshold, which is based on your VAT accounting period and explains the maximum amount of penalty points you can receive before being subject to a £200 fine.

Penalty points are also issued for NIL returns and repayment returns.

The different penalty point thresholds are set out below:

  • Annual accounting period = 2 points threshold
  • Quarterly accounting period = 4 points threshold
  • Monthly accounting period = 5 points threshold

Once you have exceeded the penalty point threshold for your accounting period, you will instantly receive a £200 penalty.

The penalty point threshold doesn’t automatically reset after you have exceeded the maximum number of penalty points and paid the £200 fine. You will continue to receive payment penalties for each subsequent late submission. To fully clear your penalty points, you will be expected to pay any outstanding VAT owed and have a longer period of submitting VAT returns on time.

The penalty point threshold may vary if you have a non-standard accounting period or if you change how often you submit VAT returns to HMRC. This will usually need to be agreed upon by HMRC first, and the penalty point system will be adjusted. For more information about late payment penalties, visit the Gov website.

What happens if I submit my VAT return after the deadline?

There are many reasons why you might miss your VAT deadline, such as disorganised account management, finance issues or personal circumstances. Sometimes, these situations can’t be helped, which is why the VAT points-based system is helpful. It allows you to get a warning before receiving the financial penalty.

If you miss a VAT payment, HMRC will notify you through a “VAT notice of assessment tax” detailing the late VAT return and how much VAT is due.

If the late payment is 16-31 days overdue, then you will receive a first late payment penalty. This penalty then increases after 31 days.

The late submission penalty rules won’t apply to you if:

  • You are a new VAT-registered business, and this is your first VAT return
  • You are cancelling your registration, and this is your final VAT return
  • You are making a one-off return covering more than a month, quarter or year

Can I appeal penalties for late VAT returns?

If you have received a late payment penalty, then you’re probably wondering if you can remove it from your account. As long as you have a reasonable excuse for the late payment penalty, you can write to HMRC explaining the reason and request that it be removed.

While it varies across individuals and businesses, a reasonable excuse may involve bereavement, serious illness, technical errors and other unexpected issues beyond your control.

Submitting your VAT return as soon as possible after your reasonable excuse has been resolved is essential.

How is interest on late VAT fines calculated?

If you miss the due date for submitting your VAT return, not only will you receive a late VAT fine, but you will also be required to pay interest on the fine until you make the VAT payment.

The late payment interest is calculated at the Bank of England base rate, including an additional 2.5%.

How can I improve my VAT return process to avoid future delays?

If you want to improve your VAT return process and avoid future delays, getting on top of your accounting and bookkeeping is a smart first step. Keeping accurate records of your VAT transactions, planning ahead of the due date and using professional digital accounting software or apps can also help you manage your VAT responsibilities more efficiently.

Our team at AudTax are VAT specialists and understand the various complexities surrounding VAT payments.

We can help you improve your VAT return process in the future by:

  • Preparing VAT returns
  • Filing VAT returns
  • Advise on VAT rates
  • Advise on VAT schemes
  • Advise on allowable expenses available to your business
  • Deal with any VAT investigations or late payment penalties

Get in touch with our VAT accountants today

AudTax has experience working with many VAT-registered businesses, so we have good knowledge of HMRC’s VAT policies. We can apply our industry knowledge and expertise to ensure you stay on top of your VAT returns.

Not only will we keep you compliant and on-time with VAT deadlines, but we will also ensure you are aware of all deductions and exclusions that can help you save money on your VAT payments.

Whether you’re a small business owner or an established firm, at AudTax, we can help you stay on top of your tax and VAT returns. We have a range of services targeted at assisting businesses to make the most of their time and finances.

We can help you with all areas of VAT, from VAT registration to paying VAT penalties. For more information, take a look at our comprehensive VAT services, or contact us today to arrange a call.

Frequently asked questions about late VAT returns

For more information about what happens if you submit a late VAT return, take a look at some of our most frequently asked questions below.

How many penalty points are given for late VAT returns?

You will receive one penalty point for each late VAT return. The maximum number of penalty points you can acquire before getting a £200 fine varies depending on your accounting period, but it ranges from 2 to 5.

When are the penalty points for VAT submissions cleared?

Once you receive the maximum number of penalty points for late VAT returns, you’ll need to work towards removing them from your account to avoid future payment penalties. To remove them, you must submit all outstanding VAT payments for the previous 24 months and complete a prolonged period of submitting your VAT returns on time.