New VAT Penalty Regime – Points will make fines not prizes!


At Centurion we aim to continually look ahead at the issues in VAT that will face our clients to ensure they are as best prepared as possible. Looking at the general direction of VAT compliance it’s clear that clients that are proactive in their management of the tax will reduce their exposure to error and associated costs to management time as well as finances by doing so.

The new Penalty Regime gives further support to that view.

The new regime will come into play for VAT for accounting periods beginning on or after 1 April 2022 and creates a “standalone” late submission penalty using a points basis depending on how the VAT return is submitted. When you reach the points threshold, the fixed penalty of £200 is levied. The level of points threshold depends on the taxpayer’s submission frequency: annually = 2 points, quarterly = 4 points, monthly = 5 points.

The good news is that penalty points accrued will automatically expire after 24 months if you remain below the points threshold. After the points threshold has been reached all points will expire after the taxpayer has met their return obligations for a set period of time based on their submission frequency: annually = 24 months, quarterly = 12 months, monthly = 6 months.

The Default Surcharge penalty is the current regime that applies when late payments for VAT returns occur but this new regime will replace that system. The new late payment penalty will consist of 2 separate charges. The first charge will become payable 30 days after the payment due date and will be based on a set percentage of the balance outstanding. The amount of that charge will depend on payments made or time to pay arrangements that are agreed during those first 30 days.

First charge

Days after payment due date

Action by taxpayer


0 to 15

Payments made or taxpayer proposes a time to pay that is eventually agreed

No penalty is payable

16 to 30

Payments made or the taxpayer proposes a time to pay that is eventually agreed 

Penalty will be calculated at half the full percentage rate (2%)

Day 30

No payment made, no time to pay agreed

Penalty will be calculated at the full percentage    rate (4%)

 Second charge

A second charge will also become payable from day 31 and accruing on a daily basis, based on amounts outstanding. As with the first charge, the taxpayer can agree a time to pay with HMRC. If a time to pay agreement is reached the penalty will stop accruing from the date it is proposed.

More details are in the latest updated guidance which you can read here If your organisation would like help to improve its VAT compliance and reduce the risk or errors and late submissions of VAT returns then do get in touch with your Centurion VAT team via


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