Before the pandemic hit, the Government announced that it would change how penalties and interest were applied for VAT purposes. This was obviously delayed, however, the new rules will soon apply ...
These changes affect everyone submitting VAT returns for accounting periods starting on or after the 1st of January 2023. Nil or repayment VAT returns received late will also be subject to penalties!
From 2023, late submission penalties will work on a points-based system. Make a late VAT return and you get a penalty point. When a particular threshold is reached, you get a £200 penalty with a further £200 penalty for each subsequent late submission. Penalty points vary according to the frequency of returns. Points can be reset back to zero if returns are submitted on time for an extended period of time. I think it will be a good idea to start with zero points and get any outstanding returns done as soon as possible.
Thankfully, for businesses to get used to the changes, there will be no first late payment penalties for the first year as long as all VAT is paid in full within 30-days of the due date.
However, interest will be calculated as the Bank of England base rate minus 1% with a minimum of 0.5%.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.