For VAT periods starting on or after 1 January 2023, HMRC is replacing the default surcharge with separate penalties for late returns and late payment of VAT. 

HMRC is also introducing a new approach to charging interest on late-paid VAT.

The new points-based system for late submissions is designed to be more lenient for the occasional slip-up while penalising those who repeatedly fail to comply. It will operate similarly to the penalty points system for motoring offences. Also, like the system for motoring penalties, the points expire after a period of time.

If your business submits its return late (which also applies if you submit a nil or repayment return late), you could face penalty points and a £200 fine. 

How do the new penalties work?


You must send a VAT Return by the deadline for your accounting period. Your accounting period is when you need to send a return to HMRC, for example, quarterly.

Under the new system, late submission penalties will now work on a points-based system. You will receive a penalty point every time you submit a penalty late.

Once you’ve reached a penalty point threshold, you’ll receive a £200 penalty and a further £200 penalty for each late submission while you’re at the threshold.


VAT Returns not affected:

  • first VAT return if you’re newly VAT registered
  • final VAT return after you cancel your VAT registration
  • one-off returns that cover a period other than a month, quarter or year

Please get in touch with us if you have any queries on how the new VAT penalty change affects your business.


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