Skip links

UK introduces new penalty system for late VAT submissions

UK tax authorities are introducing a new penalty system for late VAT submissions. (The system also applies to Income Tax Self Assessment and will eventually extend to other taxes.) Under the new system, taxpayers will incur a defined number of points if they miss a VAT submission or payment deadline. HMRC designed the system to be fairer, as only taxpayers who consistently miss their deadlines will ultimately receive a penalty. Taxpayers that make occasional VAT errors will therefore not be subject to automatic penalties.  

The new penalties apply from 1 April 2022.

The new late VAT submission penalties 

Under the new penalty system, taxpayers receive a point every time they miss a submission deadline. HMRC will notify them of each point incurred. Once they exceed the point threshold, they will be subject to a £200 penalty.

The penalty threshold depends on submission frequency. For annual VAT submissions, the threshold is 2 points. For quarterly submissions, 4 points. The threshold for monthly submissions is 5 points.

Note that the points expire after two years. HMRC can also choose not to levy a point at its discretion.

Preventing systemic VAT errors

VAT compliance is complex. Many companies, especially businesses that rely on manual VAT compliance processes, are liable to file erroneous VAT returns at some point.  

HMRC’s points-based system recognises that occasional errors happen, while effectively cracking down on repeat offenders. 

In order to avoid systemic VAT noncompliance, companies therefore need robust and effective compliance processes that prevent error and ensure VAT returns are filed accurately and on time, every time.

VAT automation that eliminates human error

Vatglobal’s proprietary VAT compliance technology automates the VAT compliance process, making it much simpler, faster and easier to meet your obligations. The intelligent software automatically error-corrects documentation and the system ensures you never miss a deadline. An HMRC report even found that digital VAT compliance increases a company’s productivity

Get in touch with Vatglobal for a digital VAT compliance solution designed to fit your business.  


Get a quote