New Year, New changes to VAT and Interest Charges.
VAT registered businesses can expect to see some changes this year as HMRC plans to double down on those who persistently miss their obligations with the addition of both penalty and interest charges to the system in 2023.
From January 1st a new penalty system has been introduced by HMRC that is considered to be a fair alternative to the previous system. The system in place previously did not target specific offenders, but anyone who missed a payment, no matter how late the payment was.
For help with understanding the new VAT system, or for VAT help for your business, get in touch with our talented team of accountancy and VAT experts at Venton today.
VAT Changes that could affect your Business
The previous VAT payment system featured equal penalties for businesses that were one day late making their payments and those that were consistently up to a year late on their payments, meaning those who made late payments by mistake were hit the same as those who appeared to abuse the system.
This update to the system should help to make VAT payments fairer for people that pay late with the intention of paying in full as soon as possible, by weighting the penalty incurred to how late the payment is made.
For businesses that are VAT registered, the longer you take to pay your VAT after its due date will now incur different charges, making it in people’s best interests to pay it as soon as possible. However, accidentally missing a day will no longer incur the same interest charges as before.
Interest rates have increased for all late payments, being added to each payment from day one. You can expect to see a 2.5% interest rate above the Bank of England’s base rate. Unlike penalty charges, interest charges are applied to all late payments to compensate HMRC for late payments.
New Penalty Charges For VAT Late Payments
Creating new penalty charges for VAT late payments is a big change from HMRC. Penalty payments have been designed to deter frequent late payments, whilst still allowing for mistakes.
These changes to the penalty applied to VAT are a great incentive to get businesses to pay their VAT on time to avoid incurring additional charges to their business.
New Penalty Points System for late VAT returns
As well as new penalty charges for late VAT payments, Penalty Points have been introduced to help reduce late VAT payments.
If you are submitting a late VAT return after your given accounting period you can expect penalties based on a new penalty point system.
Discover VAT Accountancy Services at Venton
Looking to keep on top of your VAT payments this year, and avoid the additional interest and Penalty charges from HMRC? Using Venton’s trusted accountancy service and VAT service can help to keep you on top of payments, whilst also providing you with important financial information that will help your business.
Get in touch with our talented team today for more information, or check out our range of helpful accountancy services online today.