VAT Late Payment & Penalties from Jan 2023
Overdue payments apply to the late VAT payments for the VAT accounting term starting on or after 1st January 2023. The VAT default surcharge has been replaced with the new penalties for what is paid late, and VAT returns are also submitted late. In addition, the way interest is charged also changes completely. These changes will affect everybody who will offer returns like a nil or repayment return.
How will the overdue payment penalties be?
Overdue payment penalties would apply to any payments of VAT that are not paid in full by the relevant due date except the VAT payments on account besides installments for the wet annual accounting scheme. The sooner you pay, the lower the penalty amount will be for overdue payment penalties. You can also propose a payment plan at any time, which can mean you receive lower or no penalties.
Which VAT payments have overdue payment penalties
It can include all the payments due, like on your VAT return.
Following an amendment to a return or correction.
From a VAT assessment that is issued when you did not submit the return.
From a VAT assessment that is issued for another reason.
What will happen if you cannot pay your VAT on time?
From the first day, your payment is overdue until you pay in full; the government will charge the due payment interest. Therefore, you need to connect with HMRC as soon as possible if you are having any challenges paying by the deadline for the accounting term line; this will stop more penalty charges and interest from being added to VAT that you already own.
Check if you can pain installments.
You can ask HMRC for a payment plan that is known as the time-to-pay arrangement. The time-to-pay account is flexible and is adapted to the specific financial circumstances of a person or a business. If HMRC agrees to a time-to-pay agreement with you, it can mean lower or even no overdue payment penalties, while it can cover all the outstanding amounts due, like penalties and interest.
Taking action to avoid further overdue payment penalties
between day one and fifteen overdue
To avoid penalties that would apply from day sixteen, you need to always pay in full and arrange a time to pay on or between the 1st and the 15th day.
Between days 16 and 30
to avoid high penalties that apply from day thirty-one, you need to pay in full and also agree on a time to pay on or up to day thirty.
Period of familiarization
To give you time to get used to the charges, the government will only charge a first overdue payment penalty after 31st December 2023. This is provided that within 30 days of your payment due date, you either pay in full or make a time-to-pay arrangement.
If you do not keep to time to pay, the arrangement can get canceled if you do not possess the conditions, and if this happens, HMRC would also charge first and second overdue payment penalties like the time to pay arrangement had never existed.
