Previously for any business which submitted its VAT return and/or payment late, HMRC would not impose a surcharge on the first occasion that this happened. Instead they would issue a warning letter telling the business they were in the “surcharge regime”. If within the next 12 months another return or payment was late a penalty of 2% would then be levied, with this increasing to 5%, 10% and then 15% for each subsequent late return/payment. The business would have to render and pay its VAT returns on time for a full 12 months to come out of the regime. These rules will still be applied for business with an annual turnover in excess of £150,000; however the rules for smaller businesses have been relaxed.
On the first occasion that a business with a turnover below £150,000 is late HMRC will issue a help letter. If the business then misses another return deadline within 12 months it will be put into the surcharge regime as detailed above.
Also, HMRC will not normally issue a surcharge at either the 2% or 5% rates if they calculate it to be less than £400. Surcharges issued at the 10% and 15% rates are subject to a minimum charge of £30.
If you have experienced problems with the default surcharge regime or would like to explore whether you may have a case to appeal against a surcharge assessment please contact us. For a full break down of the penalties that may be imposed if a VAT return is submitted, or paid, late please see http://www.hmrc.gov.uk/vat/managing/problems/penalties.htm
If you would like further assistance with this or any other VAT matter, please contact Hayley Rodgers on 01962 735350.