New VAT penalty regime delayed until 2023

The Financial Secretary to the Treasury announced recently in a Written Ministerial Statement that the new penalties for late submission and late payment of tax which were due to take effect for VAT from 1 April 2022 thus replacing the current system of default surcharges are being delayed by nine months until 1 January 2023.

According to the statement, this extra time is to allow HMRC to ensure the IT changes necessary for the new penalties and interest charges can be introduced as effectively as possible. HMRC says this will also allow businesses more time to prepare and for HMRC to thoroughly test the necessary IT changes with users. In the meantime, the current default surcharge VAT rules will continue.

HMRC has updated the following documents/publications as a result:-

• Penalties for late payment and interest harmonisation;
• Interest harmonisation and penalties for late submission and late payment of tax; and
• Penalties for late submission.