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VAT Deadline Penalties and How to Avoid Them

Abul Nurujjaman, 

VAT is value added tax which can be viewed as a tax on consumer spending and goods imported into the United Kingdom (UK). It can also be examined as a consumption tax based on value added to goods and services. 



The deadlines for submitting VAT is dependent on the deadline shown on your VAT return. There are two different deadlines for submitting your VAT payments, the most common type of VAT is paid 4 times a year it is called VAT MOSS scheme and the other is the VAT annual accounting scheme.


Under the VAT MOSS scheme, businesses need to pay quarterly if the dates happen to be on a weekend or a bank holiday business are required to pay the preceding working day.


These dates are:

20 April for the quarter finishing 31 March

20 July for the quarter finishing 30 June

20 October for the quarter finishing 30 September

20 January for the quarter finishing 31 December


Channel S News- Grand Opening Ceremony 


The VAT annual accounting scheme is a scheme where you pay once a year and the deadline for payment is 2 months from the last day of your accounting period. Under this scheme your predicted VAT taxable revenue or turnover needs to be £1.35 million or less, which makes it an option an advantage for small business owners. Under this scheme businesses can make early VAT payments towards their bill, the amount businesses pay is contingent upon their previous return or it is predicted for business that is new to VAT. Every year only one VAT return is submitted. After submitting their VAT return businesses, can either make a last payment which can be the distinction between their advance or early payments and their definite VAT bill. Business can also file an application for a refund, if they have overpaid on their VAT payment.


Penalties and Surcharges 


Penalties occur when HMRC put a default next to the business account. Defaults are recorded when HMRC does not receive a business s VAT return by the date of the deadline or when the complete payment for VAT has not entered HMRC s account by the deadline.


HMRC can charge a business up to a 100% for a penalty. The first penalty is for £400 if a business submits a paper VAT return unless told otherwise by a HMRC that an online copy is required.

The second penalty is 30% of an assessment which is sent by HMRC which might be low and the business does not tell them it is incorrect within 30 days. An assessment is an estimation given by HMRC of what they think a business owe s them, this is only sent to businesses that have not sent their VAT Return and not paid any VAT that is due on time. 

The third penalty is 100% of any under estimated or over estimated VAT claimed if businesses send a return that includes careless or purposeful errors.



A business can go into a 12 month surcharge period if they default. HMRC will write a letter to a business that defaults describing if they owe any surcharges and what will occur if they were to default again. Defaulting again within this time period could result in the one an addition 12 month extension. Furthermore businesses might have to paid an additional amount including the VAT they already owe.  


The amount the business pays depends on the surcharge percentage on the VAT unpaid on the deadline date for that accounting year which is the default. As seen in the table below the surcharge increases month on month every time the business defaults in the surcharge period. Business can rest easy because they are not charged for their first default. 


Table: how much businesses are to be charged 


Defaults in between 12 months

Surcharge if annual revenue is less than £150,000

Surcharge if annual revenue is more than or is £150,000


No surcharge

2% (there should be no surcharge if it is below £400)


2% (there should be no surcharge if it is below £400)

5% (there should be no surcharge if it is below £400)


5% (there should be no surcharge if it is below £400)

10% or £30 (depends on which one is higher)


10% or £30 (depends on which one is higher)

15% or £30 (depends on which one is higher)

6 months or more

15% or £30 (depends on which one is higher)

10% or £30 (depends on which one is higher)


However, exceptions to the surcharge are made if businesses submit their VAT return after the deadline such as; full payment by the due date, have to pay no tax and are due a VAT repayment. 


How to avoid penalties 

It is in the interest of all business owners to pay their VAT on time in order to avoid penalties. By paying on time and having excellent records are good and effective ways to avoid paying penalties.

At Taj accountants we understand how HMRC penalties work, which in return helps us provide an efficient and effective service to our clients. Our Authorisation as an agent, allows HMRC to deal with us on behalf of our clients. As Advisors at Taj Accountants, we feel all our actions and commitments are geared towards helping you avoid penalties and problems.

We believe we provide our clients with adequate and reliable information on how the system works. This includes looking into our clients record keeping arrangements and processes to see whether or not they are adequate enough to produce accurate returns. 



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Disclaimer: The information provided in this blog is brought to you by Taj Accountants. As you are reading this blog of your own free will, any information taken from this blog is at your risk. Before using the information provided to apply, to your business seek professional or legal advice.Taj accountants will not be liable for any damages.

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