December 1, 2023

HMRC’s new penalty regime for overdue submitting and overdue bills of VAT can be fairer however extra advanced with curiosity being charged on all overdue bills.

Alan Pearce, VAT spouse on the Blick Rothenberg, mentioned : “HMRC is introducing a brand new penalty regime for overdue submitting and overdue bills of VAT for returns starting up on or after 1 January 2023. Which all companies which can be registered for VAT want to concentrate on.

The brand new regime can be fairer to companies via penalising those who constantly report and pay overdue, somewhat than those who make the extraordinary slip up. It’s going to exchange the present default surcharge regime that has been broadly criticised for levying vital consequences the place fee is best in the future overdue. On the other hand, in contrast to the present regime, there can be a extra advanced multi-tier consequences gadget with curiosity additionally being charged on all overdue bills.”

The brand new regime will successfully have 4 several types of fees; a set penalty quantity for overdue filings in accordance with a issues gadget (a equivalent idea to totting up issues for using offences); an preliminary two-part mounted charge penalty for overdue bills of two% and four% (making use of to the primary 15 and 30 days); an ongoing 4% day-to-day interest-based penalty (making use of after 30 days) and curiosity charged at 2.5% above the Financial institution of England base charge (making use of from the outset).

“The brand new penalty regime is extra sophisticated than the present default surcharge regime. On the other hand, apparently to be fairer to these companies that may now and again pay overdue and rewards those who do their very best to pay exceptional tax as early as conceivable. Underneath the present laws companies are continuously hit with huge surcharges of between 2% and 15% for merely being in the future overdue. This may continuously be brought about via a one-off management error or banking extend.

The trade must subsequently be welcomed and must keep away from the will for plenty of default surcharge appeals the place the volume of the penalty is disproportionate to the volume and timing of the overdue fee. Alan mentioned: “For lots of defaulters, the brand new laws will lead to a rather small penalty and curiosity having to be paid.

On the other hand, for companies that constantly fail to post their VAT returns on time and are continuously greater than 30 days overdue in paying, they’ll undergo the easiest stage of consequences and curiosity. It kind of feels that HMRC have struck a steadiness of penalising serial offenders extra closely whilst incentivising compliance and being extra lenient on those who make the occasional slip up.”

“Moreover, HMRC has introduced it’ll practice a “mild contact” for the primary yr of operation. Particularly, the place a industry is doing its very best to conform, HMRC will waive the primary 2% mounted penalty for VAT sessions as much as the top of 2023. This successfully implies that equipped bills is gained inside of 30 days of the due date (or, all the way through this era, an option to HMRC has been made for a time to pay software) consequences may also be have shyed away from. On the other hand, even the place settlement is reached with HMRC, curiosity will nonetheless practice.”