Definition
VAT penalty points are HMRC’s points-based system for late VAT returns, used for accounting periods starting on or after 1 January 2023. Each late return, including nil and repayment returns, earns one point. When a business reaches its threshold (four points for quarterly filers), HMRC charges a £200 penalty, plus a further £200 for every late return while it stays at the threshold.
Thresholds and clearing points
The threshold is 2 points for annual filers, 4 for quarterly filers and 5 for monthly filers. Below the threshold, points expire automatically, usually after 24 months.
At the threshold, points only clear once the business has completed a period of compliance (12 months of on-time returns for quarterly filers) and sent every outstanding return for the previous 24 months. SmartFiling’s guide to VAT deadlines and penalty points works through the dates.
Late payment is separate
A first late payment penalty applies once VAT is more than 15 days overdue: 3% of the amount unpaid at day 15, plus 3% of anything still unpaid at day 30. A second penalty then builds at 10% a year from day 31, and late payment interest runs at Bank of England base rate plus 4% from the first day overdue.
Related questions
- When are VAT returns due, and what are the penalties for filing late? Usually one month and seven days after the VAT period ends, with late returns penalised through the points system above.
- Can SmartFiling help if I've already missed a filing deadline? Yes, SmartFiling says it can still help after a missed deadline, and sending every outstanding return through its MTD VAT return service is one of the two conditions for clearing points.
Related terms
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VAT return
A VAT return is the report a VAT-registered business sends to HMRC, usually every three months, showing how much VAT it charged on sales (output VAT)…
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Late payment interest
Late payment interest is the interest HM Revenue and Customs (HMRC) charges when tax is paid after its due date, including Corporation Tax, VAT and Self Assessment.
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Time to Pay arrangement
A Time to Pay arrangement is a payment plan agreed with HM Revenue and Customs (HMRC) that lets a business or individual pay an overdue tax bill…
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