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 ...
From 2023, penalty points vary according to the frequency of VAT returns!
As of the 1st of January 2023, default surcharges will be replaced by new penalties for late submission of VAT returns or late payment of what is owed. There will also be changes as to how VAT interest is calculated.
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%.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about these new VAT penalties or have some outstanding VAT returns you need to get filed before 2023, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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