What Happens if You Miss a VAT Deadline? Late VAT Return Penalty Explained

As a business owner, you manage dozens of things every day, and keeping your VAT returns on time is one of the top responsibilities. But what happens if you miss a VAT deadline?

Missing a VAT deadline is not just an administrative issue; it triggers costly penalties. Since 1 January 2023, HMRC has operated a new penalty system for VAT-registered businesses in the UK. This VAT penalty points system separates the penalties for submitting a return late from those for paying late.

The good thing is that the consequences depend on what you missed. If you submit your VAT return late, it can result in a penalty point. However, paying the VAT due late can result in financial penalties and late payment interest. Let’s explain HMRC VAT late payment penalties in detail.

What Is the VAT Return Deadline in the UK?

Before learning what happens if you miss a VAT deadline, it is crucial to know the VAT return deadline UK. For most UK VAT-registered businesses, the deadline for submitting an online VAT return is usually one calendar month and 7 days after the end of the VAT accounting period. This is also the deadline for paying any VAT due. You must pay your VAT by the deadline.

Also, check your VAT online account, which shows your specific VAT Return and payment deadlines. Do not rely only on calculating the deadline yourself.

Some arrangements have different deadlines. For instance, if you use the VAT Annual Accounting Scheme, you normally submit one VAT Return a year and make advance payments towards your VAT bill. You also have 2 months after the end of the annual accounting period to submit the return and make any balancing payment.

Keep in mind that a shorter period of less than 4 months has a different deadline. Some businesses in the UK may also be required to make VAT payments on account, and these payments have separate payment deadlines.

What Happens if You Miss a VAT Deadline?

Since 1 January 2023, late submission penalties operate under a penalty points regime. This means if you submit a VAT Return after its deadline, HMRC will charge one penalty point for that late submission. The system is designed to be proportionate, with a financial penalty applying once you reach the penalty point threshold for your submission frequency.

Note that the rules apply even if your return is a nil return and there is no VAT to pay, or a repayment return. Look at the table below to understand the penalty point threshold and VAT return frequency.

Once you reach the threshold, HMRC charges a £200 penalty. It will also charge a further £200 penalty for each subsequent late submission while you’re at the threshold.

Note: The main point when considering what happens if you miss a VAT deadline is that a single late return does not automatically result in a £200 penalty. The consequences depend on your existing penalty points, the length of the accounting period, and whether any exception applies.

What If You Use a Non-Standard Accounting Period?

Sometimes HMRC agrees that you can submit VAT Returns for a non-standard accounting period. When HMRC agrees to a non-standard accounting period, then a different penalty-point threshold applies depending on the length of the period, as mentioned in the table below:

Removing VAT Penalty Points

Once a business reaches the penalty point threshold, its points will not expire automatically. To remove all the points, a business must meet two conditions.

• First, complete the relevant period of compliance by submitting returns on time for the required period. The length of this period depends on the VAT Return frequency.
• Second, submit all outstanding returns due in the previous 24 months.

The required compliance period depends on VAT Return frequency:

• Annual: 24 months
• Quarterly: 12 months
• Monthly: 6 months

What Happens if You Miss a VAT Deadline and Have No VAT to Pay?

Missing the VAT Return submission deadline can result in a penalty point, even if you submit a nil return or a repayment return.

You get one penalty point for each late return. If you reach a threshold based on your filing frequency, HMRC can charge a £200 penalty. Additionally, each extra late submission after that adds another £200 penalty.

What Happens if VAT is Paid Late?

As discussed, late submission and late payment are treated as separate matters. Here is the explanation of late-submission penalty points, late-payment penalties, and VAT late payment interest.

Under HMRC’s current rules, no late-payment penalty is charged for up to 15 days overdue. However, interest can start accruing from the date the VAT payment becomes overdue, even during the first 15 days when no late payment penalty applies.

Since the rate of interest can change, businesses should check the current HMRC rate when calculating the potential cost of a late payment.

For 16 to 30 days overdue, the first late-payment penalty is 3% of the VAT outstanding at the end of day 15. Whereas, for 31 days or more overdue, the first penalty is calculated at 3% of the amount outstanding at day 15 plus 3% of the amount outstanding at day 30.

Furthermore, from day 31, a second late payment penalty arises daily at an annual rate equivalent to 10% of the outstanding VAT, until the balance is paid.

How to Appeal a Point or a Financial Penalty?

The most frequent question businesses ask, other than “what happens if you miss a VAT deadline,” is how to appeal a financial penalty.

If you believe HMRC has incorrectly issued a VAT penalty point or financial penalty, you may be able to challenge the decision.  HMRC will send you a penalty decision letter, which will explain the penalty and also tell you how to request a review or appeal.

You have the right to ask HMRC to review the decision. You can also appeal directly to the First-tier Tribunal. However, a review is usually the quicker option. Moreover, you can request a review in writing or through your VAT online account.

However, you should explain why you disagree. For example, HMRC charged the penalty point incorrectly, you had a reasonable excuse for submitting the return late, or you believe the financial penalty has been calculated incorrectly.

If you have been charged VAT penalties, HMRC gives you 30 days to respond to the offer of a review or appeal to the tax tribunal. If you miss the deadline, you will need to explain why you missed it.

Final Thoughts on What Happens if You Miss a VAT Deadline?

The penalty for missing a VAT deadline depends on whether you missed the filing deadline, the payment deadline, or both. It also depends on which VAT accounting period the return relates to.

The best way to avoid getting a VAT penalty is to act quickly. This means you need to submit any outstanding return, check your VAT account, and pay what you can.

If you cannot afford to pay VAT in full, you can contact HMRC. Keep accurate records and set reminders ahead of your VAT Return deadline to prevent the problem from recurring.

Moreover, if you need an accountant to manage your VAT returns on time, we can help. At AccountingFirms, we help you find the best accountant as per your needs. Search based on your needs, compare services, and choose an accountant in no time.

Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.