Penalties ― late payment of VAT

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note sets out how the penalty regime for the late payment of VAT applies for VAT accounting periods commencing on or after 1 January 2023.

For separate penalties associated with the late submission of VAT returns, see the Penalties ― late submission and failure to submit returns guidance note.

These two penalty regimes replace the default surcharge regime.

See also De Voil Indirect Tax Service V5.302C.

Penalties for late payment of VAT ― the basics

Under the penalty regime for late payment of VAT no penalty should be charged if within 15 days a business either pays the VAT it owes in full or agrees a time to pay arrangement with HMRC.

A first penalty is calculated at 3% of the VAT owed at day 15 when payment is made (or a payment plan agreed) on or between days 16 and 30 after the due date.

If a payment is 31 days or more overdue then:

•
a first penalty will be calculated at 3% of the VAT owed at day 15

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Penalties ― late payment of VAT

Penalties ― late payment of VAT