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Making Tax Digital - Penalties

The new penalty regime for late VAT filings will come into force for VAT periods beginning on or after 1 April 2022.  The new law will apply to most taxes but this article considers the new law in relation to Making Tax Digital for VAT.

Late filing of VAT returns

It has been confirmed that a points based system will be operated for the late submission of VAT returns. Under the new system, a point will be given for each VAT return that is submitted late. Once a business accrues a certain number of points a financial penalty of £200 will be charged. A penalty will continue to be charged for each subsequent failure but the points will not increase. The points threshold depends on the frequency a business files VAT returns.

  • Annual
  • Quarterly
  • Monthly
  • 2 points
  • 4 points
  • 5 points

It has also been confirmed that points will have a shelf life and will expire after a period of good compliance. The period of good compliance depends on filing frequency but also that all returns for the preceding 24 months have been filed.

  • Annual 24 months
  • Quarterly 12 months
  • Monthly 6 months
  • 2 submissions
  • 4 submissions
  • 5 submissions

HMRC have the power to exercise their discretion and to not apply points if a taxpayer has a reasonable excuse, for example when software fails. Taxpayers will have the right to appeal against points and penalties issued.

If you would like to discuss these changes please contact our VAT partner, Alison Birch.

This article was updated on 23 August 2021.

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    To discuss this feature further please contact Alison Birch:

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