Penalty reform for VAT delayed until January 2023

18/01/2022

The penalty reform for late payments has been delayed until 1 January 2023 Treasury minister, Lucy Fraser has confirmed in a statement to Parliament.

There is currently a VAT default surcharge in place, which is incurred if the VAT return is submitted late or the payment for VAT due has not been received by the deadline.

The surcharge was due to be replaced by a reformed late submission and payment penalty in April 2022.

However, this change is being delayed in order for HMRC to implement the necessary changes to its online system.

In the statement, Lucy Frazer said: “This extra time allows HMRC to ensure the IT changes necessary for the new penalties and interest charges can be introduced as effectively as possible, ensuring a high standard of service to customers.”

The new penalty regime will apply to VAT and Income Tax Self Assessment (ITSA) and will include changes to the following:

• Late payment penalties
• Time-to-Pay arrangements
• Interest rate harmonisation (to bring VAT in line with other tax regimes)
• Points-based penalties for late submission

Read the full statement on the penalty reform here.

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