CH192280 - penalty reform: penalties for failing to file VAT returns by the due date for periods from 1 January 2023: liability to financial penalties: reaching a penalty point maximum

NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”

When a taxable person has reached the maximum number of penalty points for a group of returns, they incur a financial penalty of £200. All subsequent failures to submit a return on time will trigger another financial penalty of £200 instead of another penalty point.

The legislation describes two circumstances when a person is liable to a financial penalty:

Condition A (reaching the maximum number of penalty points)

• the taxable person is awarded a penalty point in respect of a failure to submit a VAT return on time, and
• on being awarded that penalty point, or on being awarded a penalty point in respect of an earlier failure, the taxable person has the maximum number of penalty points for the group of returns to which the return belongs.

Condition B (further failures to submit on time when already at the maximum)

• A failure to submit a VAT return on time occurs on a day on which the taxable person already has the maximum number of penalty points for the group of returns to which the return belongs.

If either Condition A or B is met, the taxable person is liable to a fixed penalty of £200. However, as with awarding penalty points, if a taxable person has more than one failure date (submission due date + 1) in a calendar month, a taxable person will not be liable to more than one financial penalty for those VAT returns.

Where a taxable person is liable to a financial penalty, HMRC may assess the penalty – see CH192290

The table below show the penalty points maximum for each type of return

Submission frequency	Penalty point maximum
Annual and non-standard periods over 20 weeks	2
Quarterly and non-standard periods over 8 and up to and including 20 weeks	4
Monthly and non-standard periods up to and including 8 weeks	5

FA2021 SCH 24 para 15 (2), (3), (4) & (5)