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Points-based regime introduced for late VAT filing | AccountingWEB
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Points-based regime introduced for late VAT filing

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A new penalty and interest regime will be rolled out in the new year for late filing and late payment of VAT, resulting in some significant changes. Emma Rawson takes a closer look at the rules that will apply.

7th Oct 2022
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From 1 January 2023, a brand new penalty and interest regime will be rolled out for late filing and late payment of VAT. This will result in some significant changes, including the prospect of penalties applying to repayment traders and nil returns for the first time.

What’s changing and when?

The new penalties will replace the existing default surcharge rules for VAT periods starting on or after 1 January 2023. As a result, the first taxpayers to enter the new regime will be those in stagger group 1 and monthly filers.

For late filing, the new penalty regime will be points based, with each failure to submit a return on time resulting in the taxpayer receiving a penalty point from HMRC. Once the total number of penalty points reaches a certain threshold, a fixed financial penalty of £200 will be charged. 

The penalty points threshold depends on how regularly the return in question is filed:

  • Annual returns – 2 points
  • Quarterly returns – 4 points
  • Monthly returns – 5 points.

So a taxpayer filing quarterly returns would have to file four returns late before they incurred a penalty. 

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Replies (14)

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By Paul Crowley
07th Oct 2022 09:15

' HMRC is building an online system that should make this process more efficient.'
Really?
More efficient just means more penalty
And would that system be invisible to agents?

Thanks (3)
By ireallyshouldknowthisbut
07th Oct 2022 09:50

hang on, they are are introducing the new system in January...........less than 3 months away..........but haven't even developed the system for tax payers (let alone agents) to know what the points are, and from your language it suggests barely thought about it.

The words, "what the actual **expletive** are these amateurs playing at?" spring to mind.

Surely to launch in January, they should ALREADY have the detailed rules in place, all the issues discussed with agents representative bodies so as to flush out any issues, the software built and trialled and ready to go.

Is anyone holding them to account on this? Or has everyone given up and we just accept gross incompetence and blindly fumbling along as par for the course.

Thanks (6)
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By Hugo Fair
07th Oct 2022 13:48

Despite this all being a carbon copy of the penalty scheme for late RTI filings, they appear not to have thought through ANY of the practical implications.
Just one simple example - where's the new box for reporting a 'late filing reason' (let alone an on-line appeal process)?

If you keep reading the final 3 paras over and over again, you can see a pattern ("HMRC is building .." / "HMRC is currently looking into .." / "This includes exploring .." / "We should hear more details ..") - albeit a pattern that resembles a turgid pool of slow-moving excrescence.
It's usually considered sensible to build a latrine *before* needing to foul the environment.

Thanks (6)
Replying to Hugo Fair:
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By johnjenkins
10th Oct 2022 09:43

Maybe this is one of the things we will hear postponed when the November mini, mini, mini, maybe major, budget/financial update/uturn stuff is announced.

Thanks (1)
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By Wanderer
08th Oct 2022 10:16

I wish that we could start awarding HMRC points leading to fines every time they don't meet a deadline, break a promise, fail to deal with something without multiple chasers etc. etc.

Thanks (12)
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By Ian McTernan CTA
10th Oct 2022 11:53

Oh good, another complicated penalty regime designed to catch the unwary and clobber NIL and repayment cases....

I'm guessing agents will have no access to the accumulated point total, especially when taking on a new client and won't it be a pleasant surprise when you don't manage to file your first return on time (due to the long time it can take to get access/MTD set up etc) to find the client moaning about the £200 penalty they just received on their repayment claim....

Thanks (2)
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By Jdopus
10th Oct 2022 15:25

I have to say, I'm normally one of the first to criticize HMRC changes, but no longer having the risk of enormously disproportionate penalties for clients with large VAT liabilities seems like a big step forward to me and far outweighs some of the potential problems the new system is bound to have.

Thanks (0)
Replying to Jdopus:
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By Hugo Fair
10th Oct 2022 15:34

Not sure from where you get the idea that this will stop "the risk of enormously disproportionate penalties for clients with large VAT liabilities"?

The proposal is 'simply' covering penalties for late filing and late payment of VAT.

Thanks (1)
Replying to Hugo Fair:
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By Jdopus
10th Oct 2022 15:39

Have I misunderstood the premise? I was under the impression this was replacing the regime where penalties would be based on a % of the amount owed in the VAT return.

Thanks (0)
Replying to Jdopus:
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By Hugo Fair
10th Oct 2022 16:11

Well, yes and no (if I've understood correctly - which is not guaranteed especially where 'proposals' that may change are concerned)!

https://www.gov.uk/guidance/prepare-for-upcoming-changes-to-vat-penaltie...

"For VAT periods starting on or after 1 January 2023, the default surcharge will be replaced by new penalties if you submit VAT returns late or pay VAT late.
There will also be changes to how VAT Interest is calculated.

"For late payment penalties, the sooner you pay the lower the penalty rate will be:
...
31 days or more overdue -
* You will receive a first penalty calculated at 2% on the VAT you owe at day 15 plus 2% on the VAT you owe at day 30.
* You will receive a second penalty 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."

Thanks (1)
Replying to Hugo Fair:
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By Jdopus
11th Oct 2022 09:35

I see, not quite as good as I was expecting. Though to be honest, the 15 days of leeway and it only scaling to 2% for another 15 days after that rather than 5% immediately would go a long way for a lot of my clients, who most commonly seem to incur fines through simple forgetfulness of the deadlines rather than intentional avoidance of the amounts.

Thanks (0)
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By kestrepo
11th Oct 2022 12:21

I hope that we can also award points to HMRC if, for example, they are late in paying back a VAT refund.....

Thanks (0)
Replying to kestrepo:
Ivor Windybottom
By Ivor Windybottom
11th Oct 2022 18:25

and that, my friend, is where HMRC will benefit most.

If I understand correctly, the current system where HMRC pay the taxpayer 5% of repayments made more than 30 days late will no longer exist under the new regime, so HMRC's incentive to process refunds quickly will be gone.

Thanks (0)
Replying to Ivor Windybottom:
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By VATs-enough
12th Oct 2022 12:00

Indeed.

And amazingly (or not) very little mention about this aspect, despite the potentially significant ramifications.

HMRC will have ZERO incentive to authorise VAT repayments in a timely fashion.

Is that progress !?!

Thanks (0)