From 1 January 2023 the new penalty points system for late VAT returns came in to force. HMRC will allocate 1 point each time a filing deadline is missed; your points for late returns will expire after the specified period has elapsed (see below) unless you go over the penalty.
Points are also issued for late nil and repayment returns.
When you have reached the relevant number of points, a £200 penalty will be charged. All subsequent missed deadlines will trigger a penalty.
Points for penalties
A penalty will be charged when the penalty thresholds are reached:
| VAT Return Frequency | Penalty Points Threshold |
| Annual | 2 Points |
| Quarterly | 4 Points |
| Monthly | 5 Points |
 VAT returns which do not incur penalties
There are VAT returns which do not incur penalties as follows:
- First VAT return if you’re newly VAT registered
- Final VAT return after you cancel your VAT registration
- One-off returns that cover a period other than a month, quarter or year.
Resetting the points clock after a penalty
If you obtain any penalty points in the below periods, depending on the frequency of your returns, then to reset the clock you need to submit all the returns on time for the number of months shown below.
| VAT Return Frequency | Penalty Points Threshold |
| Annual | 24 Months |
| Quarterly | 12 Months |
| Monthly | 6 Months |
Avoiding a penalty
To avoid a penalty, filing returns and paying VAT on time is the best way to avoid points. However, if you are unable to pay your VAT bill, it is still best to file your return on time (and avoid the risk of £200 penalties) and approach HMRC for a Time To Pay arrangement.
If you need any further information, please give our VAT Team a call to see how we can help you.
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