HMRC's New Late VAT Return Points and Penalties

Published / Last Updated on 04/03/2023

As we have told you on this website, HMRC introduced Making Tax Digital (MTD) for VAT registered limited companies in April 2019 with was extended to all VAT-registered businesses (partnerships and self employed) from April 2022.

HMRC also introduced a new penalty system for all late VAT return periods starting on or after 1 January 2023 and payments due from 7 March 2023 i.e., from this coming Tuesday.

Late VAT Submission Penalties

This is now based upon a points system.

  • Each VAT return that is submitted late, will receive a penalty point for the firm until you reach the penalty point threshold.
  • VAT registered businesses that file quarterly have a points threshold of 4 points.
  • When your business reaches its points threshold, it will automatically receive a £200 penalty.
  • For each subsequent late submission whilst you’re at the threshold your business will receive a further £200 penalty.
  • This continues until you start to get your penalty points reduced by meeting the following two conditions.

How to Reduce Penalty Points

Condition A = File VAT returns on time consecutively for your business

Your VAT Accounting Reporting Period

Period of Compliance

VAT Returns to Make On Time


24 months



12 months



6 months


Condition B - Submit any outstanding returns for the previous 24 months.

Your business must submit any outstanding returns that were due in the current year for 12 months and submit all the returns for the following year (total 24 months) for condition B is met.

Get Back to Zero Points

Penalty points will be reset to zero immediately when both condition A and condition B are met.  This means there is a continual requirement to submit VAT returns on time for 24 months before your points expire.

Struggling to Submit Returns e.g., hospitalisation/illness/injury?

HMRC recommends you contact them when you are 1 and 15 days late to ask for more time to pay or propose a payment plan which may result in lower, or no penalties applied by HMRC..

The stance is a tough one and designed so that the sooner you pay, the lower the penalty amount will be so, do not 'put your head in the sand'.

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