CH192320 - Penalty reform - penalties for failing to file VAT returns by the due date for periods from 1 January 2023: assessing penalty points and financial penalties: time limits for assessing penalties

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”

HMRC cannot assess a late submission penalty under Schedule 24 FA2021 after the later of date A) and date B) However, Date B is not applicable to VAT.

Date A is the end of the period of 2 years beginning with

• if the financial penalty is to be assessed in respect of a single failure, the day on which the failure occurred.
• if the financial penalty is to be assessed in respect of more than one failure in the same month, the day on which the latest of the failures occurred.

The failure is treated as occurring on the day after the submission due date.

Date B

If a taxable person does not file a return and

• an assessment of the liability to tax is issued -The assessment of the financial penalty cannot be made later than the last day of the period of 12 months after the end of the appeal period for the assessment.
• there is no assessment of the liability to tax- The assessment of the financial penalty cannot be made after the last day of the period of 12 months from the date on which the liability was ascertained, or it is ascertained that the liability is nil.

Date B does not apply to VAT, an assessment in the absence of a return (a central assessment) is not appealable, and so has no appeal period. An end date given by a) is therefore unable to arise. It is not anticipated that b) would arise in VAT because central assessments are issued routinely.

FA2021 SCH 24 para 17