What Happens If My VAT Return Is Late?

As a business owner, you are responsible for making sure your VAT returns are submitted (and your tax bills are paid) on time. If your organisation exceeds the VAT registration threshold (currently set at £85,000 as…

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Last Updated: 14th March 2022

As a business owner, you are responsible for making sure your VAT returns are submitted (and your tax bills are paid) on time. If your organisation exceeds the VAT registration threshold (currently set at £85,000 as of 2019/20), you’ll be required to pay VAT.

How much VAT you owe is determined by filling out a VAT return usually once every three months. This process lets HMRC know your total sales and purchases, and therefore the amount of VAT you owe, can reclaim, and the amount of any VAT refund from HMRC.

The deadline for your VAT return is generally one calendar month and seven days after the end of a VAT reporting period.

But what happens if your VAT return is late? In this blog, we emphasise why judicious VAT returns and payments are essential, and what the consequences can be when you miss one.

First, You’ll Receive A Reminder Letter

Completing the VAT tax return and paying VAT might sound like a pain… but it’s actually a piece of cake. Any payment can be made either by setting up a direct debit with HMRC, the easiest way not to forget to pay, or online through the HMRC portal

It’s also worth noting that HMRC isn’t the cold organisation that many people make it out to be – they actually understand that mistakes can happen.

If you haven’t missed the due date before, they’ll probably give you a bit of leeway on submitting a late VAT return. Instead of an immediate fine, you’ll likely just receive a polite but firm warning that you need to prioritise being timely with your tax responsibilities.

A VAT return reminder letter will turn up on your doormat, explaining that your VAT is now late, and you need to quickly bring your account up to date.

Provided you take prompt action, you won’t acquire any surcharges…

Ignore This, And You’ll Enter The Surcharge Period

If you don’t take this written warning seriously enough and end up filing your VAT return late again, you will be punished with a year-long probation known as the VAT return surcharge period.

The surcharge period applies to all businesses but the rules vary depending upon your business turnover

Failure to meet any HMRC deadlines during this probationary period will result in you accruing fines. Simply put – with every missed payment comes a higher fine.

A late VAT return during the surcharge period can begin a detrimental domino effect – so whatever you do, don’t delay.

Repeatedly File A VAT Return Late, And Penalty Charges Will Increase

If your VAT return is repeatedly late and you keep missing deadlines, the size of the fine you’ll pay during the surcharge period will increase.

Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more
2nd No surcharge 2% (no surcharge if this is less than £400)
3rd 2% (no surcharge if this is less than £400) 10% or £30 (whichever is more)
4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more)
5th 10% or £30 (whichever is more) 15% or £30 (whichever is more)
6 or more 15% of £30 (whichever is more) 15% of £30 (whichever is more)


This graph was taken from: www.gov.uk

It is worth noting that even though you may have filed a VAT return late there will be no surcharges to pay if you paid your VAT on time, are due a refund or have no VAT to pay.

In addition to surcharges for late submission and payment of your VAT, you can also be penalised.

HMRC can charge penalties up to 100% of any VAT return that they believe to be carelessly or deliberately inaccurate. There’s also a hefty £400 penalty for anyone who sends their VAT return by paper. Since Making Tax Digital for VAT came into force, the process must be done online. The only exception is if your organisation has been informed – by HMRC themselves – that paper returns are being accepted.

You may be able to appeal against a penalty in some cases. However, proving that you’ve missed all these VAT deadlines with a series of ‘reasonable excuses’ is often very difficult. HMRC will, however, accept that situations involving connection problems or a sudden crisis can be a cause of a late return or payment, inaccuracies or a failure to keep adequate records.

Everything You Need To Know

The simple truth is that the taxman won’t tolerate late VAT payments.

The more deadlines you miss, the bigger the surcharge you’ll receive. It doesn’t take long for these surcharges to take their toll on the financial state of your business. That’s why it’s crucial to be prepared for VAT returns right from the very beginning.

If you’re concerned about falling behind on your VAT commitments, there are a number of actions you can take to prevent yourself from getting into difficulties. Firstly, you can set up email reminders via the HMRC online portal – which nudge you before a deadline so that you don’t forget about it.

You can also speak to HMRC about a Time to Pay (TTP) arrangement. These can be organised if you can prove your company is profitable and is just experiencing cash flow problems (rather than nearing insolvency).

TTPs involve spreading your VAT payments across a longer period of time than is ordinarily permitted. This can help you avoid late fees from accumulating – although it’s worth bearing in mind that HMRC will perform a rigorous check into your finances to make sure you meet their TTP criteria.

Last but not least – there’s GoSimpleVAT. Our bridging software offers you a fast and stress-free way to submit your VAT returns online and on time. All your details are sent directly to HMRC, and there’s even email support and guidance available along the way.

Speak to our team today for more information about submitting your VAT return online with GoSimpleVAT. We’d be happy to answer any questions you might have.

Last updated on 3rd September 2019.

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Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.

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