In our previous blog we mentioned how the government made some new changes regarding VAT late submissions. In this one we will talk about new updates on VAT late payment penalties. So before you start with this one you might wanna check out our previous blog about VAT late submissions and penalties.
Overview
For VAT accounting periods starting on or after 1 January 2023, late payment penalties will apply to late VAT payments.
The VAT default surcharge is being replaced by new penalties for VAT which is paid late and VAT Returns that are submitted late. The way interest is charged is also changing.
What happens if you pay your VAT Late ?
You can recieve late payment penalties for any VAT payments that have not been paid in full by the relevant due date except:
- VAT payments on account
- instalments for the VAT Annual Accounting Scheme
For late payment penalties, the sooner you pay the lower the penalty amount will be. You can choose a payment plan at any time which could mean you receive lower or no penalties.
VAT payments that you get penalised for
Payments :
- On your VAT return
- Following an amendment to a return or correction
- from a VAT assessment we issued when you did not submit your return
- from a VAT assessment we issued when you did not submit your return
If for any reason you cannot pay your VAT on time for your accounting period you should contact HMRC as soon as possible. This could stop more penalty charges being added to VAT you owe.
If you want to pay in instalments you can ask HMRC for a payment plan known as a Time to Pay arrangement which is flexible and is adapted to the specific financial circumstances of an individual or business.
If your lucky and HMRC agrees a Time to Pay arrangement with you, it can mean lower, or no, late payment penalties and can cover all outstanding amounts due, including penalties and interest.
Until when do you get your first late payment penalty ?
You’ll first get a late payment penalty if your payment is 16 or more days overdue.When your payment is 31 or more days overdue, your first late payment penalty increases, and you get a second late payment penalty.
Payment up to 15 days overdue:
- No late payment penalties
Payment between 16 and 30 days overdue:
- You get a first late payment penalty, calculated at 2% on the VAT you owe at day 15.
Payment 31 days or more overdue:
- You get a first late payment penalty, calculated at 2% of what was outstanding at day 15, plus 2% of what is still outstanding at day 30.
- You get a second late payment penalty, calculated at a daily rate of 4% per year on the outstanding balance and charged everyday from day 31 until the outstanding balance is paid in full.
To give you time to get used to the changes, we will not be charging a first late payment penalty until after 31 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 by any chance you do not keep to the conditions of the Time to Pay arrangement at any point, it may be cancelled. If this were to occur HMRC would charge both first and second late payment penalties as if the Time to Pay arrangement never existed.
Lastly you can check details of your penalties in your VAT online account and ask for a review through your online account.
You should know that your penalty may be cancelled or amended if you have a reasonable excuse.
Seeking additional information? Look to Cangaf Ltd for all your answers. Contact us today for a complimentary quote, and let us handle your accounting concerns expertly!