VAT deadlines can be easy to miss when you're busy running a business. Whether you've forgotten to submit your VAT Return or haven't been able to pay your VAT bill on time, the important thing is to deal with it as soon as you can.
HMRC treats late VAT Returns and late VAT payments differently, so the penalties you could face will depend on which deadline you've missed and, in the case of an unpaid VAT bill, how long the payment remains outstanding.
In this guide, we'll explain what happens when you're late, the penalties and interest that can apply and what you can do next.
What Should You Do If You've Missed a VAT Deadline?
If you've realised you've missed a VAT deadline, here’s what you can do to prevent the situation from becoming more costly.
Submit Your VAT Return as Soon as Possible
If your VAT Return is overdue, submit it as soon as you can. HMRC uses a points-based system for late VAT Returns, which we'll explain in more detail below.
Pay What You Owe as Soon as Possible
If you've submitted your return but haven't paid your VAT bill, make the payment as soon as you're able to. Late payment interest starts from the first day your payment is overdue, while late payment penalties can apply once the payment is more than 15 days late.
Contact HMRC If You Can't Pay
If you can't afford to pay your VAT bill in full, don't simply leave the balance outstanding. Contact HMRC as soon as possible to discuss your circumstances and the options available to you.
Consider a Time to Pay Arrangement
HMRC may agree a Time to Pay arrangement, allowing you to repay your outstanding VAT in instalments based on what you can afford.
Agreeing an arrangement can mean you face lower or no late payment penalties, depending on when you contact HMRC. However, late payment interest will continue to build on the outstanding VAT until it has been paid in full.
When Is the VAT Deadline?
VAT Returns and payments are normally due one calendar month and seven days after the end of your VAT accounting period.
Different arrangements can apply depending on how you account for VAT. For a full breakdown of quarterly, monthly and Annual Accounting deadlines, read our guide to VAT payment deadlines.
What Happens If You Submit Your VAT Return Late?
If you submit a VAT Return late, you'll normally receive a penalty point. This includes returns where you have no VAT to pay or are due a repayment.
You won't necessarily receive a financial penalty the first time you're late. Instead, points build up until you reach a threshold based on how often you submit your VAT Returns:
Once you reach your threshold, you'll receive a £200 penalty. If you submit another return late while you're still at the threshold, you'll receive a further £200 penalty each time.
For example, a business submitting quarterly VAT Returns reaches the threshold after its fourth late submission. If its next return is submitted on time, there is no additional penalty, but it remains at the four-point threshold until the points are removed.
How Do You Remove VAT Penalty Points?
If you haven't yet reached your penalty point threshold, individual points will normally expire automatically after around two years.
Once you've reached the threshold, however, the points won't simply expire over time. To reset them to zero, you need to:
- submit all of your VAT Returns on time for a set period of compliance; and
- make sure you've submitted all VAT Returns that were due in the previous 24 months.
How long you need to remain compliant before the points expire depends on how often you submit:
Once you've met both requirements, your penalty points will be reset to zero.
What Happens If You Pay Your VAT Late?
If you don't pay your VAT bill by the deadline, the penalties you could face depend on how long the payment remains outstanding.
The sooner you pay what you owe, the lower the penalty will be. Under the current rules, you won't receive a late payment penalty if you pay in full within the first 15 days, although late payment interest will still apply.
The second penalty is calculated daily and continues until the outstanding VAT is paid in full or you propose a Time to Pay arrangement that HMRC goes on to agree.
How Does VAT Late Payment Interest Work?
Even if you pay your VAT within 15 days and avoid a late payment penalty, late payment interest starts from the first day your payment is overdue.
HMRC calculates late payment interest at the Bank of England base rate plus 4%. Because the base rate can change, the actual interest rate charged can change too. Interest continues to build on the outstanding amount until your VAT is paid in full.
What If You Can't Afford to Pay Your VAT Bill?
If you know you won't be able to pay your VAT bill in full, contact HMRC as soon as possible rather than allowing the debt to build up.
You may be able to agree a Time to Pay arrangement, which allows you to repay what you owe in instalments based on your business's financial circumstances.
When you contact HMRC matters. If you propose a Time to Pay arrangement within the first 15 days and HMRC agrees it, you can avoid a late payment penalty. If you contact HMRC later, an arrangement can still help reduce the penalties that build up from that point.
You'll still be charged late payment interest on the outstanding VAT, even while you're paying through a Time to Pay arrangement. It's also important to keep up with the agreed payments. If you break the terms of the arrangement, HMRC can cancel it and calculate the late payment penalties as though the arrangement had never been in place.
Can You Appeal a VAT Penalty?
If you think a VAT penalty or penalty point has been issued incorrectly, or you had a reasonable excuse for missing the deadline, you can challenge HMRC's decision.
HMRC will explain your options in the penalty decision letter. For VAT penalties, you'll normally have 30 days to accept HMRC's offer of a review or appeal to the tax tribunal. You can also request a review of late VAT penalties through your VAT online account.
What counts as a reasonable excuse will depend on your circumstances. HMRC may accept situations such as an unexpected hospital stay, serious illness, problems with HMRC's online services or a fire or flood that prevented you from dealing with your VAT affairs.
How to Avoid Missing Future VAT Deadlines
Once you've dealt with an overdue return or payment, a few simple steps can make future VAT deadlines easier to manage:
- Keep your VAT records up to date rather than leaving everything until your return is due.
- Use accounting software and reminders to keep track of upcoming submission and payment dates.
- Set money aside for VAT regularly so the funds are available when your bill is due.
- Check your VAT online account if you're unsure when your next return or payment is due.
- Ask an accountant for help if managing VAT is becoming difficult or taking too much time away from your business.
Need Help With a Late VAT Return or Payment?
If you've missed a VAT deadline or are struggling to pay what you owe, getting the situation sorted sooner can help prevent further penalties and interest from building up.
Our VAT accountants can help you understand what you owe, deal with outstanding VAT Returns and communicate with HMRC where necessary. Get in touch with Ryans to discuss your VAT situation.
FAQ's
Do You Get a Penalty for Submitting a Nil VAT Return Late?
Yes, the late submission penalty rules also apply to nil VAT Returns and repayment returns. If you submit one late, you'll normally receive a penalty point in the same way as you would for a return where VAT was due.
Contact UsCan HMRC Waive a VAT Penalty?
A penalty or penalty point may be cancelled or amended if HMRC accepts that you had a reasonable excuse for missing the deadline. If you've already received a penalty you disagree with, you'll need to use HMRC's review or appeals process to challenge it.
Contact UsCan You Get a Late Submission and Late Payment Penalty at the Same Time?
Yes. HMRC treats submitting your VAT Return late and paying your VAT late as separate obligations, so both types of penalty can apply if you miss both deadlines. Late payment interest can also be charged on VAT that remains unpaid.
Contact Us