VAT returns starting on or after the 1 January 2023 will be subject to the new penalty regime. However, HMRC are still writing to tax payers with Default Surcharge issues for returns in 2022, stating that the surcharge liability period will end in mid/late 2023 (i.e. 12 months after the period in which the current default occurred).

This is incorrect. The Default Surcharge regime ceased to be on 31 December 2022.

Whilst the new penalty regime sees a points based system (and we all know what points mean...), and once the points threshold is reached, there is a fixed penalty of £200 per each subsequent late return/payment. Interest will also be calculated and charged.

The shorter the VAT return period the quicker you can reach the points threshold, with monthly VAT returns being technically capable of being subject to the new penalty regime from August 2023 (HMRC have said that there will be a “soft landing” for 2023).

It’s important to note that the new regime will see the £200 fine being imposed for nil or repayment returns that are late, unlike the surcharge which is a percentage of the net VAT due.

Most farming VAT returns will be repayment at some stage of the year, but the new regime means that these will be subject to penalties if submitted late once the points threshold has been passed.

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