VAT Late Filing Penalties and Surcharges

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Consequences of Not Meeting the VAT Due Date

Businesses can find it nerve-wracking and expensive if they fail to meet the deadlines set by HMRC for Value Added Tax (VAT).

The financial and reputational repercussions of VAT late filing can be severe, ranging from fines, penalties to interest payments and even investigations. To reduce the impact of such lapses, businesses should take certain measures.

This article will explain the consequences of missing HMRC’s VAT deadline and the steps to take if your return or payment has been submitted late.

What are the Cut-Off Times for Submitting and Disbursing Your VAT?

The due date for handing in and settling your Value Added Tax (VAT) is contingent on what accounting period you utilize. Generally, companies submit their return on a quarterly basis, although some may opt for the Annual Accounting System. In the event of past missed deadlines, some may even choose to turn in their return on a monthly basis.

Every Three Months

If you file your VAT declarations with HMRC every three months, then you must hand in the declaration and pay the amount due by the end of the seven-day period commencing one month after the quarter ends.

For instance, the payment for the VAT return for the three months finishing on 31 March 2023 must be sent by 7 May 2023.

Each year

The Annual Accounting Scheme is a method employed by some firms to make it easier for small businesses to manage their finances and decrease the amount of paperwork that is needed. This scheme enables these businesses to submit one VAT return on an annual basis, rather than the traditional four.

Organizations that adopt the Annual Accounting Scheme are obligated to fulfill their VAT payments within a two-month span post the closure of their fiscal year.

If you’re looking at the financial year that concludes on April 5th, 2022, the due date for your VAT payment is June 5th, 2022.

On a month-by-month basis

If your company has had difficulty fulfilling its VAT payments up until now or habitually surpasses the limit for payments made per quarter, HMRC may require you to submit and pay your VAT on a monthly basis. In this situation, you must make your VAT payment within one month and a week after the end of the period.

In conclusion, the due date for you to pay your VAT bill if your period ends on December 31st, 2022, is on February 7th, 2023.

What are the Consequences if You Don't Meet the Due Date for a VAT Return?

HMRC has announced the implementation of a fresh set of regulations for the year 2023 with respect to filing of late VAT Returns.

As of 1st January 2023, the old fault surcharge for late submission of returns has been replaced with fresh penalties.

Accounting Periods in 2022 with Late Returns

In the event that you did not submit your accounting record before the cutoff point of December 31, 2022, HMRC will send a ‘VAT notice of assessment tax’ to you. This document will state the amount of VAT that must be paid.

You may be subject to an added fee and face a 12 month surcharge period. In the event of another missed payment or not paying the full amount during this time, a surcharge plus the VAT you owe will be added on top of this, and the surcharge period will be extended for another 12 months.

Returns Submitted After a Given Time Frame in 2023

Should you submit a VAT return after its due date, you will get a penalty point. This includes those returns where nothing is declared. When the penalty points reach the threshold, you will be subject to a £200 penalty. For any additional late submissions while the threshold has been reached, an extra £200 fine will be issued.

What Occurs If I Fail to submit My Value-Added Tax (VAT) Before the Due Date?

In the event that you do not pay your VAT bill in full before the due date, you will not incur a surcharge, although you will be subjected to a 12 month surcharge period.

At the moment, if you miss a payment or don’t pay the full amount, you may be charged a surcharge in addition to the Value Added Tax, and the period of the surcharge may be lengthened by an extra 12 months.

The following table outlines any surcharges incurred depending on the number of defaults within a 12-month period and the annual turnover:

Defaults within 12 months
Surcharge if annual turnover below £150K
Surcharge if annual turnover is over £150K
No surcharge
2% (no surcharge if this is less than £400)
2% (no surcharge if this is less than £400)
5% (no surcharge if this is less than £400)
5% (no surcharge if this is less than £400)
10% or £30 (whichever is more)
10% or £30 (whichever is more)
15% or £30 (whichever is more)
15% or £30 (whichever is more)
15% or £30 (whichever is more)

It is important to be aware: If your accounting period begins on or after 1 January 2023, separate fines will be distributed for submitting the return late and for paying late.

Being Excluded from the Flat Rate System

Failing to meet the due date for paying Value Added Tax could result in being barred from the Flat Rate Scheme, or being denied entry if you intended to join.

If you are a business registered with the Flat Rate Scheme, then the consequences of not meeting the VAT deadline could be serious. Failing to pay on time may lead to disqualification, leaving you with the obligation of paying VAT at the regular rate, which would be significantly higher than normal.

If your business isn’t included in the Flat Rate Scheme but intends to join in the upcoming 12 months, failing to meet the VAT due date could render it ineligible.

Examining HMRC Records

An investigation conducted by HMRC is a thorough examination of their records. This process is used to assess compliance and identify any potential issues. The HMRC will evaluate all the documents and evidence collected to determine if any legal action needs to be taken. The investigation process can be lengthy and may require considerable resources in order to be completed properly. The HMRC may also seek assistance from other agencies in order to ensure that all aspects of the investigation are properly addressed.

The UK’s HMRC has the right to inspect businesses for a variety of VAT matters, such as overdue payment. This procedure can be taxing and take up a lot of a company’s time, and can potentially uncover other VAT problems, which can lead to additional fines and penalties.

Ruining a Reputation

The potential for harm to a person’s or business’ reputation is undeniable. This damage can be irreparable, making it essential to be aware of how to protect one’s reputation.

Missing the VAT due date may have a negative effect on the company’s reputation. A delay in paying VAT could be interpreted as a sign of inadequate financial administration, which may make potential investors, suppliers and customers reluctant to collaborate with the business.

Procedures to Ensure Not Missing the VAT Deadline

In order to not miss the VAT deadline, here are a few pieces of advice:

Make sure to maintain accurate and current records

Maintaining accurate records of your Value-Added Tax (VAT) activities is essential for making sure that the right amount is paid promptly. Keeping track of sales, acquisitions, invoices and receipts can help to sidestep any mistakes that could lead to belated payment.

Utilizing Accounting Software

Accounting programs like Sage or Quickbooks can make the VAT calculation process easier and more efficient. Additionally, these software can help you to not miss any deadlines by sending out reminders for upcoming payments.

Anticipate Ahead of Time

Organizing and arranging in advance can be very beneficial in many situations.

Prior planning is a must in order to allocate sufficient resources to pay the VAT bill in a timely manner. This will eliminate the necessity of scurrying to find money at the last minute and decrease the chances of missing the due date.

Receive Professional Guidance

It could be beneficial to get in touch with a chartered accountant like YRF Accountants if you need help with VAT returns or related obligations. Our team can help you stay on top of the requirements and make sure payments are being made in a timely manner. Click here to find out more.

If You Have Not Met the Deadline, Here Are Some Suggestions for What You Can Do

Get in Touch with HMRC

If the deadline for VAT has passed, it is important to reach out to HMRC right away. This demonstrates that you are taking the situation seriously and being proactive in resolving it. There are a couple of ways to do this: by getting in touch directly or through your online account.

Get Your VAT Return Ready for Filing

Timely filing of your VAT return is of the utmost importance, even if you have not met the deadline. Keeping up with your responsibilities helps you to avoid any penalties.

Satisfy the Obligation for Value-Added Tax

Paying your VAT as soon as possible is very important in order to prevent any potential interest and fines from being imposed. If you are unable to settle the full amount, you could consider discussing a payment plan with HMRC, thus allowing you to pay off the remainder of the debt without any extra charges.

Gaining Expert Opinion

Seeking out professional advice is a great way to get the most out of any situation. Consulting an expert in the field can provide invaluable insight and perspective that would otherwise be unavailable. Taking the time to get the advice of a professional can be extremely beneficial.

YRF’s professional accountants in Manchester are available to offer advice and support concerning your VAT responsibilities and returns. We will work with you to ensure that you are meeting HMRC’s regulations going forward. Reach out to us today to find out how we can assist you.