CH193080 - Penalty reform - penalties for failure to pay VAT on time from 1 January 2023: legislation: amounts of VAT
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.”
The late payment penalties can apply to the following amounts of VAT. The liability to, and value of a, late payment penalty depends on how late the amount is paid. The extent to which an amount is late is calculated by reference to the dates specified below:
| Row | Amount | Date |
|---|---|---|
| 1 | Amount of value added tax payable under section 25(1) of VATA 1994 (except an amount within item 3, 4 or 5 or VAT Annual Accounting Scheme instalments payable under regulation 50(2)(a) of the Value Added Tax Regulations 1995) | The date determined by or under regulations under section 25 of VATA 1994 as the date by which the amount must be paid |
| 2 | There is no entry for Row 2 as Section 335 Finance (No,2) Act 2023 omitted it as if it had never been included | - |
| 3 | Amount of value added tax shown in an assessment made by HMRC in default of a return | The date by which the amount would have been required to be paid if it had been shown in the return in question |
| 4 | Amount of value added tax shown in an amendment or correction of a return | The date falling 30 days after the date on which the amendment or correction is made |
| 5 | Amount of value added tax shown in an assessment made by HMRC otherwise than in default of a return | The date falling 30 days after the date on which the assessment is made |
In general, the table above (from paragraph 1 Schedule 26 FA21) can be interpreted as follows.
Row 1 refers to VAT that a taxable person must pay in respect of their supplies for a prescribed accounting period, except for amounts in rows 3, 4 or 5.
Note: The balancing payment for the VAT Annual
Accounting Scheme payable under regulation 50(2) (b) of the Value Added Tax
Regulations 1995 would fall within row 1. The value of the balancing payment
encompasses any instalments that remain outstanding at the balancing payment
due date.
Row 3 refers to amounts due where HMRC has made an assessment because a taxable person has not submitted their VAT return on time. This is often referred to as a prime, or central, assessment.
Row 4 refers to amounts due where a VAT return is amended or corrected.
Row 5 refers to assessments of VAT other than those covered by row 3. For example, VAT assessed under an officer's assessment.
For the purpose of this guidance, the “due date” from which late payment penalties for these amounts of VAT are calculated is generally:
- Row 1 - the payment due date for the prescribed accounting period.
- Row 3 - the payment due date for the period for which the return was not submitted on time.
- Row 4 – 30 days after the amendment or correction.
- Row 5 - 30 days after the assessment.
Examples
Aleksander uses the VAT Annual Accounting scheme. Their final instalment for their annual accounting period is due by 31 August. The balancing payment for that period is due by 31 October. If any of the instalment is still unpaid by 31 October, it forms part of the total balancing payment due and they could become liable to a late payment penalty on the unpaid balancing payment. When considering the amount that is outstanding after “day 15 following the payment due date”, you would be considering the amount outstanding after 15 November.
Fatu submitted their VAT return, and paid in full, by the due date for that period. However, they are assessed to a further £5,000 of VAT on 9 June. They must pay this amount by 9 July. If they do not do so, they could be liable to a late payment penalty. When considering the amount that is outstanding after “day 15 following the payment due date”, you would be considering the amount outstanding after 24 July.