The new VAT penalty and interest regime, due to be introduced from 1 April 2022 will be delayed until January 2023, says the UK Government
HMRC said the delay to penalty regime changes will give them extra time to ensure IT systems are ready and properly tested. The existing default surcharge rules will continue to apply in the meantime.
Under the proposed new regime, as announced by HMRC at the Bookkeepers Summit, HMRC will issue a single penalty point for each late submission of a VAT return. Once a business exceeds the point threshold (for multiple missed returns) a flat £200 penalty is charged.
New penalties for late payments will mean the first charge will be imposed at 2% of the outstanding tax if the tax due on a return remains unpaid 15 days after its due date. After 30 days the penalty will increase to 4%. The second late payment penalty is a daily penalty (set at 4% per year), starting from 31 days after the due date until the business pays the tax that is due. Late payment interest will be calculated at 2.5% above the Bank of England rate.
The Financial Secretary to the Treasury, Lucy Frazer, said in a statement: “In Finance Act 2021, the Government legislated to reform penalties for late submission and late payment of tax, initially from 1 April 2022, and to align interest charges for VAT with other major taxes.
“I am announcing that these changes for VAT businesses will now be introduced 9 months later, on 1 January 2023.
"HMRC is committed to becoming one of the most digitally advanced tax authorities in the world. The ambition and pace of change need to be balanced with well-tested systems and good customer service, particularly when businesses are facing additional challenges and uncertainty.
"This extra time allows HMRC to ensure the IT changes necessary for the new penalties and interest charges can be introduced as effectively as possible, ensuring a high standard of service to customers.”
For more information on the penalties for late payment and interest harmonisation please refer to the HMRC policy paper:
https://www.gov.uk/government/publications/penalties-for-late-payment-and-interest-harmonisation/penalties-for-late-payment-and-interest-harmonisation#overview-of-how-the-new-late-payment-penalties-work
