This guide explains what happens if you file or pay your VAT late, what penalties you might face, and most importantly, what you should do next to resolve the situation as smoothly as possible.
What to Do If You Miss the VAT Deadline
Missing a VAT deadline can be stressful and worrying, but you’re not alone, and it’s important not to panic.
With business owners juggling so many responsibilities, it’s not uncommon for them to miss deadlines such as paying VAT. However, In this guide, we’ll provide clear steps on what to do next to minimise penalties and get back on track.
Immediate Steps to Take If You Miss the Deadline
If you realise you’ve missed your VAT return or payment deadline, don’t panic. Taking swift action can help minimise penalties and prevent further issues.
1. File Your VAT Return As Soon As Possible
Even if you’re late, submit your VAT return immediately. The sooner HMRC receives it, the better your chances of reducing penalties.
2. Pay as Much VAT as You Can Right Away
Pay any VAT you owe as soon as possible to limit interest and surcharge charges. If you can’t pay the full amount, pay what you can to reduce the outstanding balance.
3. Contact HMRC Proactively
Get in touch with HMRC to explain your situation. Being proactive shows you’re taking responsibility and may help when discussing penalties or payment plans.
4. Consider a Time to Pay Arrangement
If you’re unable to pay the full VAT bill immediately, ask HMRC about a Time to Pay arrangement. This allows you to spread payments over an agreed period, avoiding further penalties and easing cash flow pressure.
How to Mitigate Penalties and Avoid Further Issues
Taking proactive steps can reduce penalties and help you stay compliant moving forward.
1. Make a Voluntary Disclosure
If you realise you’ve made an error or missed a deadline, voluntarily informing HMRC as soon as possible can demonstrate good faith. This can lead to reduced penalties and shows you’re committed to compliance.
2. Keep Accurate, Up-to-Date Records
Maintaining clear and organised VAT records is essential. Use reliable accounting software to track sales, purchases, and VAT payments accurately. This reduces the risk of errors and missed deadlines.
3. Seek Professional Advice
Working with a qualified accountant or tax advisor can help you navigate complex VAT rules, ensure timely submissions, and manage any penalties effectively. Professional support can also assist in negotiating with HMRC if needed.
VAT Deadlines Explained
Most businesses in the UK submit VAT returns and payments on a quarterly basis. This means you must file your VAT return and pay any VAT due within one month and seven days after the end of each quarter.
For example, if your VAT quarter ends on 31 March, your return and payment deadline is 7 May.
Some businesses use alternative schemes that affect deadlines:
Annual Accounting Scheme
Allows eligible businesses to submit one VAT return per year instead of four, with payments made in advance instalments and a final balancing payment due two months after the financial year-end.
Flat Rate Scheme
Designed for small businesses, this scheme simplifies VAT payments by applying a fixed percentage to your turnover. Deadlines follow the standard quarterly timetable but missing deadlines can lead to disqualification.
Monthly VAT Returns
In some cases, HMRC may require monthly submissions, especially if your business frequently misses deadlines or for cash flow management.
In this case, returns and payments are due one month and seven days after each month-end.
Understanding your VAT accounting period and associated deadlines is the first step to staying compliant and avoiding penalties.
What Happens If You Miss Your VAT Return or Payment Deadline?
If you miss your VAT return or payment deadline, HMRC has a system in place to encourage timely compliance called the Default Surcharge System (DSS).
Default Surcharge System (DSS)
When you file a late VAT return or pay late, HMRC records a default on your account.
This triggers a 12-month surcharge period, during which further late returns or payments can lead to financial penalties called surcharges. These surcharges are calculated as a percentage of the VAT due and increase with each additional default.
Penalty Points System (From 2023)
Since January 2023, HMRC introduced a penalty points system specifically for late VAT returns (including nil returns).
Each late submission adds penalty points to your account. Once you reach a set threshold, you’ll be charged a fixed penalty of £200 for each late return while at the threshold.
Interest on Late Payments
In addition to penalties, HMRC charges interest on any VAT payments made after the deadline. This interest accrues from the due date until the payment is made in full.
Other Consequences
- Surcharge Period Extension: Multiple defaults within a 12-month surcharge period can extend this period and increase penalties.
- Flat Rate Scheme Impact: Missing VAT deadlines can lead to disqualification from the Flat Rate Scheme or prevent you from joining it for 12 months, potentially increasing your VAT liability.
How HMRC Calculates Penalties and Surcharges
HMRC calculates VAT penalties based on the number of defaults within a 12-month surcharge period and your business’s annual turnover. Penalties apply separately for late VAT returns and late VAT payments.
Surcharge Percentages by Number of Defaults
| Number of Defaults Within 12 Months | Businesses with Turnover < £150,000 | Businesses with Turnover ≥ £150,000 |
| 2nd Default | No surcharge | 2% of VAT due (no surcharge if < £400) |
| 3rd Default | 2% of VAT due (no surcharge if < £400) | 5% of VAT due (no surcharge if < £400) |
| 4th Default | 5% of VAT due (no surcharge if < £400) | 10% of VAT due or £30 (whichever is greater) |
| 5th Default | 10% of VAT due or £30 (whichever is greater) | 15% of VAT due or £30 (whichever is greater) |
| 6th Default and beyond | 15% of VAT due or £30 (whichever is greater) | 15% of VAT due or £30 (whichever is greater) |
Important Notes:
- The surcharge is calculated on the VAT outstanding on the due date for the return or payment.
- If the surcharge amount is less than £400, smaller businesses may not have to pay the surcharge.
- Penalties for late returns and late payments are calculated separately and can both apply.
How Missing Deadlines Can Affect Your Business
Missing VAT deadlines multiple times can have serious consequences beyond immediate penalties. Understanding these risks can help you prioritise compliance and take corrective action quickly.
Financial Impact
Late returns and payments often lead to penalties and interest charges, which can strain your cash flow and increase your overall tax burden. Repeated defaults can escalate these costs significantly.
Disqualification from VAT Schemes
Failing to meet deadlines may result in disqualification from the Flat Rate Scheme or other VAT schemes. Losing these schemes can increase your VAT liability and complicate your accounting processes.
Risk of HMRC Investigations
Consistent late submissions or payments can trigger HMRC investigations. These reviews are time-consuming and may uncover other compliance issues, leading to further penalties.
Damage to Reputation
Late VAT payments can signal poor financial management to suppliers, customers, and lenders. This can harm your business relationships and reduce trust, potentially impacting future opportunities.
Tips to Avoid Missing VAT Deadlines in the Future
Staying on top of your VAT obligations helps you avoid penalties and keeps your business running smoothly. Here are some effective ways to stay compliant:
1. Use Reliable Accounting Software with Reminders
Choose accounting software that offers automated reminders for VAT deadlines. This helps ensure you never miss a submission or payment date.
2. Set Aside Funds Regularly
Create a dedicated VAT reserve account or regularly set aside funds to cover your VAT bills. This prevents last-minute cash flow issues when payments are due.
3. Plan Ahead and Keep Records Up to Date
Maintain accurate and timely records of all sales, purchases, and VAT transactions. Planning ahead reduces the risk of errors and last-minute rushes.
4. Work with a Professional Accountant
An experienced accountant can help you manage VAT efficiently, keep you informed of deadlines, and provide support if any issues arise.
How Ryans Chartered Accountants Can Help with VAT Compliance
At Ryans Chartered Accountants, we understand that managing VAT obligations can be complex and stressful. Our expert team is here to support you every step of the way, helping you stay compliant and avoid costly penalties.
Our comprehensive VAT services include:
- Assistance with VAT Registration: We guide you through the registration process to ensure you meet all legal requirements on time.
- Advice on VAT Planning and Administration: We help you select and implement the most suitable VAT schemes for your business to optimise cash flow and compliance.
- Use of the Most Appropriate VAT Scheme: Whether it’s the Flat Rate Scheme, Annual Accounting, or other options, we tailor VAT strategies to your needs.
- VAT Control and Reconciliation: We maintain accurate VAT records and reconcile accounts to prevent errors and simplify your reporting.
- Help with Completing VAT Returns: Our team ensures your VAT returns are completed accurately and submitted on time.
- Planning to Minimise Future HMRC Issues: We proactively identify risks and implement strategies to avoid disputes and penalties.
- Negotiating with HMRC and Representation at VAT Tribunals: If disputes arise, we act on your behalf to negotiate with HMRC and represent you in tribunals, protecting your interests.
With Ryans, you gain a trusted partner dedicated to making VAT compliance straightforward and stress-free. Contact us today to find out how we can help you manage your VAT obligations confidently.
FAQ's
What is the VAT filing deadline in the UK?
VAT returns and payments are generally due one month and seven days after the end of your VAT accounting period, which is usually quarterly. For example, if your VAT quarter ends on 31 March, your deadline is 7 May.
Contact UsWhat happens if I submit my VAT return late?
Submitting your VAT return late can lead to penalty points and, if you accumulate enough, fixed penalties. It also triggers a 12-month surcharge period where further late submissions or payments can result in surcharges. If you have overdue VAT returns, it’s important to file them as soon as possible to avoid escalating penalties.
Contact UsWhat if I pay my VAT late?
Late VAT payments incur interest from the due date until the payment is made. Repeated late payments during a surcharge period can lead to financial penalties calculated as a percentage of the VAT owed.
Contact UsCan I pay my VAT in instalments if I can’t pay the full amount?
If you can’t pay your VAT on time, contact HMRC immediately to discuss a Time to Pay arrangement that lets you spread payments and avoid further penalties.
Contact UsWhat is the Default Surcharge System (DSS)?
The DSS is HMRC’s penalty system that applies surcharges to businesses that repeatedly miss VAT return or payment deadlines within a 12-month period.
Contact UsAm I at risk of losing my Flat Rate Scheme status if I miss deadlines?
Yes. Missing VAT deadlines can lead to disqualification from the Flat Rate Scheme or make you ineligible to join it for 12 months, potentially increasing your VAT costs.
Contact UsHow long should I keep VAT records?
You must keep VAT records for at least six years. In cases of errors or investigations, HMRC can review records going back up to 20 years.
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