2023 VAT information
By reading this blog you will gain insight to the world of VAT, and the upcoming changes that the government has set in place for 2023. The following aims to guide, or further improve your understanding in VAT, whether its penalties or interest charges we aim to improve your next VAT return to insure there are no problems in the following year.
Will you be affected?
It is important to understand that the changes that came in on 1st January, 2023 will affect everyone who submits a VAT return. If you are unare of any of the changes coming hopefully we can provide you with all the information necessary.
Late VAT returns or nil payments will be targeted as late submission penalties, in doing so you will receive penalty points and financial penalties.
What is Value Added Tax?
VAT is a form of consumption tax that is applied on goods and services, at each point in the supply chain where value is added.
The amount of tax a user pays is based on the price of said product, minus any costs of material previously taxed.
VAT is based on consumption rather than income; this helps the government raise their own form of tax instead of claiming tax from the wealthy.
Submission Penalties
Late submissions will result in a penalty of points, this works as part of a system and every late VAT return will result in a penalty point. Continued late submissions will result in a £200 fine, this fine will apply to all subsequent late submissions.
Its worth noting that the threshold for penalty points may vary, depending on the frequency of submissions.
| Submission Frequency | Penalty Points Threshold | Period of Compliance |
| Annually | 2 | 24 Months |
| Quarterly | 4 | 12 Months |
| Monthly | 5 | 6 Months |
In order to reset this penalty be sure to submit all returns before the due date, for your period of compliance, this is based off the submission frequency. All returns for the past 24 months should be received by HMRC.
Late Payment Planning
If you are late paying any VAT, you will incur a penalty. Hopefully we can aid you through this issue with the simple guide below.
15 Days Overdue – If you are within this time period you will not be charged with a penalty as long as you pay the full amount you owe.
16 – 30 Days Overdue – In this case you’ll receive a penalty at 2% on the VAT you owe.
31 Days Overdue – penalties of 2% will be issued on the VAT owed at day 15, along with another charge of 2% on day 30.
Exceeding this time limit, the penalty will rise, calculated at a daily rate of 4% annually and will continue until any outstanding balance is paid in full.
The government is giving a breathing space for these changes, resulting in no charge for the first late payment for adjustment. This will apply from 1st January 2023 to 31 December 2023 as long as you pay within 30 days of the due date.
Repayment Interest
Starting January 1st, 2023, there are many changes taking place. The government is setting many things in motion including the removal of repayment supplements.
HMRC will pay you any repayment interest on VAT that you are owed, after the accounting period on January 1st, 2023.
In order to find out more on this subject, we strongly advise you to go check GOV.UK in order to see the changes that affect you. Or contact someone on the team for further details.
