For VAT periods starting on or after 1st January 2023, the penalties for late payment of VAT are changing. The amount a business will have to pay for the late payment of VAT will now be dependent on how late the payment is, therefore, the sooner you pay the lower the penalty rate will be.
Up to 15 days overdue:
You will not be charged a penalty if the VAT liability is paid in full or a payment plan is agreed between day 1 and day 15.
Between 16 and 30 days overdue:
You will receive a first penalty calculated at 2% of the VAT liability you owe at day 15 if the liability is paid in full or a payment plan is agreed between day 16 and day 30.
31 days or more overdue:
You will receive a first penalty calculated at 2% of the VAT liability you owe at day 15 plus 2% of the VAT liability you owe at day 30. You will then receive a second penalty calculated at a daily rate of 4% per year for the duration of the outstanding balance. This is calculated and applied when the balance has been paid in full or a payment plan has been agreed.
HMRC have announced a period of familiarisation to give businesses time to adjust to these changes and will not be charging a first late payment penalty for the first year from 1st January 2023 to 31st December 2023, if the VAT liability is paid in full within 30 days of the payment due date. However, late payment interest will be charged from the day your payment is due until the day your liability is paid in full. This will be calculated at the Bank of England base rate plus 2.5%.
Contact your usual adviser at Drummond Laurie if you have any questions on this or email firstname.lastname@example.org