Kevin McLeod
Written By Kevin McLeod
Licensed Insolvency Practitioner
July 11th, 2023

It is your responsibility to make sure your VAT is filed on time and any payment due is made before the deadline. Fail to do so and a range of different actions can be taken against you.

If your VAT Return is Filed Late

If you do not file your VAT return or full payment has not reached HMRC’s account by the deadline, a ‘default’ will be filed on your account. You may also enter a 12-month surcharge period which will have further implications if there is another default during this time. Further defaults during the 12-month surcharge period could result in the period being extended for a further 12 months or an additional charge being added to the VAT you owe.

The surcharge amount will increase with every further default in the following way:

Defaults within 12 monthsIf annual turnovers is more than £150,000
If annual turnover is less than £150,000
1 defaultEnter the 12-month surcharge periodEnter the surcharge 12-month surcharge  period
2 defaultsNo surcharge2 percent surcharge (no surcharge if this is less than £400)
3 defaults 2 percent surcharge (no surcharge if this is less than £400)5 percent surcharge (no surcharge if this is less than £400)
4 defaults5 percent surcharge (no surcharge if this is less than £400)10 percent or £30 (whichever is more)
5 defaults10 percent or £30 (whichever is more)15 percent or £30 (whichever is more)
6 defaults15 percent or £30 (whichever is more)15 percent or £30 (whichever is more)

There are a few exceptions when no surcharge for a late VAT return will apply. That includes:

  • If you pay your VAT liability in full by the due date;
  • You have no VAT liability due;
  • You are due a VAT repayment.

Penalties can also be applied if your VAT return is not submitted correctly. The potential penalties include:

  • 100 percent of the understated tax or over-claimed tax if the return contains a careless or deliberate inaccuracy;
  • 30 percent of an assessment if you are sent an assessment that’s too low and fail to inform HMRC within 30 days;
  • £400 if you file a paper return rather than filing your return online (unless you are exempt from online submissions).

What Happens if you do not file a VAT Return?

If HMRC does not receive a VAT return from you at all, you will be sent a ‘VAT notice of assessment of tax’ from HMRC that’ll include an estimation of how much you owe.

What if you file your VAT Return but fail to pay on time?

In this case, you will be charged interest on any VAT you owe that is not paid on time. This may also be the case if you:

  • Report less VAT than you have charged or reclaim more than you’ve paid;
  • Pay an assessment that was too low;
  • Make a mistake on a VAT return and subsequently underpay.

If you are to be charged interest, HMRC will send you a notice telling you how much you owe and how it’s worked out. The interest rate that applies to late VAT payments is 2.75 percent. Any interest you pay cannot be deducted when calculating your taxable profits.  

Need Advice?

Are you struggling to make a VAT payment? Have you received a notice informing that you will be charged interest or received a penalty for a mistake on your VAT return? For confidential, no-obligation advice, please contact 020 8444 3400.  

Read more about problems with HMRC