The headline penalty rates make the changes appear to be less costly, but the introduction of late payment interest (LPI) means it will be a lot more expensive for some businesses.
Key features of the new system
Features and implications of the new system include:
- A penalty for the late submission of a VAT return will be £200 plus another £200 for every subsequent late submission.
- On days 16 to 30 after due date, a late payment penalty will be imposed at 2% of the amount outstanding on day 15.
- On day 31, the penalty will be 2% of amount outstanding at day 15 AND 2% of amount outstanding at day 30. (If the business has made a part payment between day 16 and day 30 the penalty rate will work out to be less than 4% overall).
- LPI applies from day 1 after the due date.
For more detail and examples:
Businesses worst hit
Businesses likely to be worst hit by the new regime are those that are only late very occasionally, while those that are often late in submission and payment but only by a few days will find it more to their liking.
The new regime also replaces the repayment supplement with repayment interest. This applies where a business has submitted a repayment claim VAT return. Repayment interest will kick in from day 1 but will be at Bank of England base rate less 1% subject to a minimum rate of 0.5%.
Can we help?
If you have any questions or need help with the points outlined in this article, please speak with your Shipleys’ contact or talk to Nancy Cruickshanks and her team. Her details appear on this page.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary.
Copyright © Shipleys LLP 2022