New HMRC filing regimes designed to hit persistent offenders

16 Nov 2022

By Alix Hyde, VAT Consultant

From 01 January 2023 HMRC are introducing two new penalty regimes for VAT customers.  The penalties will affect ITSA customers from 2024.

Late Submission Penalties

Every time a business fails to submit a VAT return, they will get a point. Once they hit their penalty threshold (2 points for annual returns, 4 points for quarterly returns and 5 points for monthly returns), they will receive a fine of £200.  Every subsequent late return will incur another £200 fine. 

Points will expire after two years and reset to zero.  But, if at the penalty threshold, taxpayers must demonstrate a period of compliance to reset their points. 

To do this they must:

·         Submit all returns on time for a set time period (24 months for annual returns, 12 months for quarterly returns and 6 months for monthly returns), and

·         Submit all returns for the preceding twenty-four months (even if late).

Both conditions must be met for the points to be reset.

HMRC say this will be kinder to people who make a one-off mistake, whilst penalising persistent offenders.


Late Payment Penalties

Basically, the sooner you pay the lower the penalty rate will be.

First Penalty

No penalty if payment is made within 15 days of the due date. 

Day 15 – penalty is 2% of the amount outstanding.

Day 30 – penalty becomes 2% of the amount outstanding at day 15 PLUS 2% of the amount outstanding at day 30. 

Additional or Second Penalty

Day 31 – daily penalty of 4% per annum of the outstanding amount.  This will only stop when the outstanding balance is paid.

Soft Landing Period

No penalty will be charged between 01 January 2023 and 31 December 2023, IF the amount due is paid in full within 30 days of the payment due date.

Time to Pay Arrangements

If a time to pay arrangement is agreed with HMRC, the penalty will stop accruing, but only if the terms of the TTP agreement are honoured.


If you have any VAT related questions or queries, please contact Alix Hyde –

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