UK VAT penalty system for late submissions
UK VAT penalty for late VAT submissions, the UK (HMRC) tax authorities are establishing a new penalty system. (The system also applies to Self-Assessment Income Tax and will be extended to other taxes in the future).
If a taxpayer misses a VAT filing or payment date. They will receive a certain number of points under the new system. HMRC created the system to more equitable, as only taxpayers who frequently miss deadlines will face a penalty. As a result, taxpayers who make occasional VAT errors will not be penalised automatically.
The new system will apply from 1 April 2022.
How the HMRC VAT penalty scheme will work
Every time a taxpayer misses a deadline. They will receive a point under the HMRC VAT penalty system. HMRC will inform them of each point they have received. A £200 penalty will impose, if they exceed the point thresh old.
The penalty threshold is determine the frequency of submissions which can see below:
| Submission frequency | Penalty threshold |
| Annual | 2 points |
| Quarterly (including MTD for ITSA) | 4 points |
| Monthly | 5 points |
The points are only valid for two years. HMRC also has the option of not levying a point at its discretion.
What this means UK tax?
VAT compliance is a complex. Many firms, particularly those that rely on manual VAT compliance systems. They are prone to filing inaccurate VAT returns at some time. HMRC’s new point-based system acknowledges that mistakes happen, while effectively punishing repeat offenders.
Companies must have comprehensive and effective compliance systems in place to avoid systematic VAT noncompliance. These processes must prevent errors and ensure that VAT returns are completed precisely and on time, every time.
Our long history of working with ecommerce sellers, means we can offer you expert advice regarding VAT compliance – so please do not hesitate to give us a call on +44(0)2036128450 or send an e-mail to [email protected].
