New points system for late VAT reporting - Great Britain

From January 2023 it will become more expensive should you miss a deadline for VAT reporting or payment

15. December

New British points-based penalty system for late submission and payment.


From January 1st. 2023 new increased late payment fees, and bigger fines will be imposed by the British authorities (HMRC), if you submit your VAT-return late or make a late payment.

The changes will come in effect on January 1st and be for all VAT-accounting periods starting after that date including nil-returns and payments.

Points system for late VAT reporting

The new standard procedure for late submission of VAT-returns will be calculated from a point-based penalty system, which is triggered with a penalty point for every late submission done.

For quarterly submissions you will receive one penalty point for each late submission, and when you reach the threshold of 4 penalty points, a fine of GBP 200 will be issued for each late submission of VAT-return going forward.

You can reset your penalty points back to zero if you for 12 consecutive months submit all your VAT-return in a timely matter and make sure all outstanding returns due for the previous 24 months have been received by HMRC.

Are you submitting your VAT-return annually or monthly, the penalty points system will look like this:

Submission frequency Penalty points threshold Period of compliance
Annually 2 24 months
Quarterly 4 12 months
Monthly 5 6 months

Late payment fees

Even though you always submit your VAT-return in a timely manner it is not enough to avoid HMRC completely, as you also have to pay any outstanding amounts within enforced due dates.
Should you be in a situation where you won’t be able to make to correct payment on time, these are the consequences depending on how late your payment is.

Payment up to 15 days overdue

No fine will be issued, if you manage to pay the full amount or agree to a payment plan within the first 15 days.

Payment between 16 and 30 days overdue

You will receive the first penalty calculated at 2% on the VAT you owe at day 15 if you pay in full or agree to a payment plan between the 16th and the 30th day.

Payment being 31 days or more overdue

You will receive the first penalty at 2% on the VAT you owe at day 15 plus 2% on the VAT you owe at day 30.

A second penalty will be issued, calculated at a daily rate of 4% per year for the duration of the outstanding balance. This is calculated when the outstanding balance is paid in full or a payment plan is agreed upon.

Period of familiarisation

To allow you time to adapt to the new changes, HMRC will not be charging the first late payment penalty throughout 2023, as long as you manage to pay in full within 30 days of your payment due date.

Late payment interest

From 1. January 2023 you will be charged a late payment interest form the day your payments is overdue to the day your payment has been paid in full.

Late payment interests is calculated as the Bank of England base rate plus 2.5%.