For most businesses, you will (if you are VAT registered) need to submit a VAT return every 3 months. HMRC allocate your VAT quarters so you will have to look at your VAT registration certificate to determine which quarters you have been allocated.
The VAT return is then used to determine both how much VAT you owe the government or what your VAT refund from the HMRC will be.
Needless to say, VAT return submissions are incredibly important.
But what happens if your VAT return is late?
A VAT return is simple enough to fill out and is done online.
The deadline for submission is one month and 7 days after the end of your VAT quarter, and if you are not sure, your VAT online account lists all important return and deadline information.
This information is detailed and includes not only when your VAT return is due, but also when the payment must be cleared through the bank account of HMRC.
Now, this may all sound easy enough but let’s be honest: life happens.
Running a business is no easy task, especially if you have responsibilities outside of work like most of us, and it can sometimes affect our ability to get every task done on time.
However, if you forget, or are unable, to submit your VAT return on time, then, particularly if it is the first time, you shouldn’t panic yet.
However, if you are habitually late then there could be some serious financial consequences.
If both your VAT return and the full VAT amount (the payment) are not received by HMRC by the deadline date then you can be subject to both a surcharge period and penalty fees.
If HMRC records a “default” due to lack of payment OR timely submission of your VAT return, they may place you under a 12 month “surcharge period.”
This is essentially a probationary period so any subsequent late filings or payments made during this time will result in penalty fees and a lengthened surcharge period.
If you default again during this year, the surcharge period will be increased by another 12 months.
You will also be forced to pay an extra fee in addition to the VAT you owe.
This fee will be based on your annual turnover.
The first time you default within a surcharge period, you will not be charged – so you are allowed one slip up.
However, for every time after the first default, you will be subject to the following penalties:
Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more
2nd No surcharge 2% (no surcharge if this is less than £400)
3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400)
4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more)
5th 10% or £30 (whichever is more) 15% or £30 (whichever is more)
6th or more 15% or £30 (whichever is more) 15% or £30 (whichever is more)
You won’t be subject to a surcharge if your VAT return is late but you paid your VAT fully in time, are not required to pay any tax or are owed a VAT repayment by the HMRC.
The penalties associated with the submission of a late VAT return are as follows:
£400 for completing a paper VAT return instead of an online form (unless you were given permission)
30% of an assessment if the HMRC estimate was too low and was not corrected by you
100% of tax due for submitting a VAT return with intentional inaccuracies
While submitting a late VAT return is easy to do, it could end up costing you.
Try to submit your VAT return in a timely manner to avoid surcharge periods and penalty fees.
You’ll thank yourself later!
Thanks ever so much for taking the time to read my post I truly hope you’ve found it useful and insightful. If you have any questions feel free to contact us!
I am Annette Ferguson, CEO of Annette & Co. Chartered Accountant, Profit First Professional and creator of the Business Wealth Engine. We’re also SUPER social so don’t forget to follow. Here’s to your success!
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