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Resources

New VAT penalty and interest regime could be more expensive for some businesses

Resources

New VAT penalty and interest regime could be more expensive for some businesses

A new VAT penalty and interest regime may come as a shock for many businesses. It comes into effect for VAT returns beginning on or after 1 January 2023.

Updated 12 October 2022

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:

For more detail and examples download our PDF overview:

THE COSTLY IMPLICATIONS OF THE NEW VAT PENALTY AND INTEREST REGIME

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 and will be at the Bank of England base rate plus 2.5%. Businesses should be mindful of the changing nature of this, given that interest rates have currently been rising sharply.

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

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