CH192210 - Expiry of penalty points: expiry of all penalty points for a group of returns
NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”
Each of a taxable person’s penalty points for a group of returns expire and the points total reset at the beginning of the first day on which both condition A and condition B are met.
Points can be reset under these conditions irrespective of how many points the person has.
Condition A
Condition A is met when the taxable person has submitted each VAT return on or before its due date for at least the relevant length of time- see table below
| Submission frequency | Relevant length of time |
|---|---|
| Annual and non-standard periods over 20 weeks | 24 months |
| Quarterly and non-standard periods over 8 and up to and including 20 weeks | 12 months |
| Monthly and non-standard periods up to and including 8 weeks | 6 months |
The relevant length of time (period of compliance) begins with the first day of the month after the month in which the most recent failure to submit a return in the group on or before its due date occurred. The failure is treated as occurring on the day after the submission due date. For example, if the latest missed submission due date was 7 August, the period of compliance starts on 1 September. If the latest missed submission due date was 31 March, the period of compliance starts on 1 May.
The full period of time needs to have passed for the condition to have been met, rather than it being met once the final return due in the period has been submitted on time.
Note – The date on which the relevant length of time begins is different when a taxable person moves between groups of returns, see CH192220. Where this happens, the period begins on the first day of the month after the first month for all or part of which a return in the new group of returns is required to be made.
For example, if a taxable person changes from quarterly to annual submissions and their first return is for 1 January 2024 to 31 December 2024, the period would start on 1 February 2025.
The start date for the relevant length of time would then revert to the normal rules where the taxable person subsequently failed to submit a return by the due date.
Condition B
Condition B is met on the day when all outstanding VAT returns due in the previous 24 months have been submitted. “All outstanding VAT returns” is not limited to returns for VAT periods starting on or after 1 January 2023.
Note – Where the taxable person has moved between groups of returns, see CH192220, Condition B also refers to outstanding VAT returns belonging to the old group of returns.
For example,
- A taxable person has been awarded a penalty point for each of the four occasions when they have failed to submit their quarterly VAT returns on time, so they have a total of 4 penalty points. As can be seen on the table above, the relevant length of time for quarterly returns is 12 months. Should the taxable person submit the next 4 VAT returns on time, they will meet condition A at the end of the period. If the taxable person also submits all outstanding VAT returns that were due in the 24 months to the previous day, they will meet Condition B. As both conditions A and B have been met, the penalty points will be reset to zero.
For both Conditions A and B, only those types of VAT returns included in item 4 of the table at paragraph 2 of Schedule 24 to the Finance Act 2021 (see details at CH192110) are relevant to whether the conditions have been met.
Where each of a taxable person’s penalty points for a group of returns expires under this provision, HMRC must notify the person.
FA2021 SCH24 para 8