Points mean penalties under new VAT regime

Jul 3, 2024

New penalties for late VAT returns and payments have come into force and will impact on VAT-registered farming businesses.  

Under the new regime, which saw a soft launch in January 2023, businesses accumulate penalty points for late VAT returns, as well as penalties for late VAT payments 

Once a threshold of points has been reached, the company will receive a fine.  

Under the scheme, HMRC will award companies one point for each filling deadline missed, including for nil and repayment returns.  

Once the threshold has been met, the company will be charged a total of £200.  

For companies that file annually, the threshold for a fine is two points; those filing quarterly, it is four points, and for those filing monthly a fine will be issued at five points.  

Penalty point expiration 

Rather like the points on your driving licence, points for late filing of VAT returns do expire. This means that if you do submit a VAT return late, but are on time for subsequent returns, you will avoid a fine.  

For companies filing annually, the expiration period is 24 months. Those filing quarterly it is 12 months and for those filing monthly, it is six months.  

Late payment of VAT 

HMRC have also introduced a graded scale of penalties for late payment of VAT which increases the further the payment is made after the original deadline date.  

For payments that are 15 days late or less, there will be no penalty. However, payments that are between 16 and 30 days late will attract a 2% penalty, and those more than 30 days will be charged at 4%.  

From day 31, there will also be a daily penalty charged at 4% per annum, meaning that a payment that is 13 months overdue will incur a total penalty of 8%.  

Exclusions from the new VAT regime 

There are a limited number of exclusions from the new regime which include the first VAT return for a newly VAT registered company; a final VAT return after the cancellation of VAT registration; and one-off returns covering a period other than a month, quarter, or a year.  

Be on time …  

Ian Parker, tax expert and director of Whitely Stimpson, said the best way to avoid penalty charges was simply to ensure your VAT is in order and to file returns and make payments on time.  

He said:

“Now the ‘period of familiarisation’ has ended, HMRC will be introducing the points system as a matter of course and any farming business that is VAT registered now needs to ensure they file their VAT returns on time, and they pay on time. Of course, it is always possible to challenge both the points, a fine, or the interest accumulated on a late payment, but this will only be successful if the taxpayer has a ‘reasonable excuse’ for not meeting the relevant deadline, which can be difficult to prove. So, it is definitely a case of prevention is better than cure when it comes to VAT.”  


To discuss the new VAT regime or any other form of tax planning, contact Ian on (01295) 270200 or email ianp@whitleystimpson.co.uk. 

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