Although no formal announcement has been made, HMRC has recently amended Notice 700/50 in relation to the surcharge regime as it relates to businesses with a turnover below £150,000.

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.