As of 1st January 2023 there is a new penalty system in place, for submitting or paying VAT returns late. The new penalties replace the default surcharge and now also apply to customers who submit nil or repayment returns.

The way HMRC calculate interest on late VAT payments and repayments has also changed. For info on the Late payment interest change click here.

The penalty point threshold is set by your accounting period. The threshold is the maximum points you can receive.

  • Annually – 2 Points
  • Quarterly – 4 Points
  • Monthly – 5 Points


What happens if you submit a VAT return late ?

For Vat periods after 1st January 2023 the penalties will work on a point based system. One penalty for each late return. If you reach your points threshold, you’ll have to pay, a fixed penalty of £200. From there you will have to pay a further £200 for each late return whilst at your threshold.

An example of the point system is :

A company submits their VAT Return quarterly. This means their penalty point threshold is 4.

They already have 3 penalty points because they submitted 3 previous returns late.

They submit their next return late and get a fourth penalty point. Because they’ve reached the penalty point threshold, they receive a £200 penalty.

The company submits their next return on time. They stay at threshold of 4 penalty points but do not get a £200 penalty.

The company submits their next return late. As they’re still at the penalty point threshold of 4 points, they receive another £200 penalty.