VAT penalty overhaul confirmed for 2022
The 2021 Budget confirmed that the government is pressing ahead with a change to the way penalties for VAT returns filed late will be charged. What’s happening?
Currently, penalties for late filing of VAT returns and late payment of VAT are dealt with under the default surcharge regime. This means that where either a return is filed late, or a payment is received late, the business receives a surcharge notice. They are then “on notice” for twelve months, with further defaults penalised by a charge calculated by reference to the tax due. There are several perceived faults with this system. Firstly, a business can avoid a charge for late filing by paying the VAT due in full. Secondly, there is no difference in the level of penalty for a return or payment made one day late compared with one made months late. But all that will change from 1 April 2022.
From that date, there will be separate penalties charged for late filing and late payment. Additionally, the penalties will increase in stages – punishing those who file or pay significantly later more than those who miss deadlines by a few days. A key feature of the new system is that it will no longer be possible to avoid a late filing penalty if the VAT is paid on time, or if the return shows a repayment is due.
Full details of the announcement can be found here.
Related Topics
-
HMRC reminds employers about payrolling benefits deadlines
HMRC is reminding employers of key dates and preparations ahead of the transition to real-time payrolling of benefits in kind (BiKs). With an important voluntary registration deadline approaching, what do payroll teams need to know?
-
Why do frozen mileage rates affect VAT?
Your business pays a fixed mileage allowance to staff who use their private cars for business travel. The rates published by HMRC have been frozen since 2011 but is this relevant to determine how much input tax you can claim on the payments?
-
HMRC restarts direct recovery of tax debts from bank accounts
HMRC has resumed use of its Direct Recovery of Debts (DRD) powers, enabling it to recover unpaid tax directly from the bank accounts of businesses and individuals who have ignored repeated attempts to settle outstanding liabilities. What does this mean in practice for business owners and directors?
This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.