You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period.’ The VAT Return records things for the accounting period like:
- your total sales and purchases
- the amount of VAT you owe
- the amount of VAT you can reclaim
- what your VAT refund from HMRC is
You must submit a VAT Return even if you have no VAT to pay or reclaim. HMRC record a ‘default’ if:
- they don’t receive your VAT return by the deadline
- full payment for the VAT due on your return hasn’t reached their account by the deadline
You may enter a 12-month ‘surcharge period’ if you default. If you default again during this time:
- the surcharge period is extended for a further 12 months
- you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe
HM Revenue and Customs (HMRC) will write to you explaining any surcharges you owe and what happens if you default again.
How much you pay
Your surcharge is a percentage of the VAT outstanding on the due date for the accounting period that is in default. The surcharge rate increases every time you default again in a surcharge period.
This table shows how much you’ll be charged if you default within a surcharge period.
You don’t pay a surcharge for your first default.
|Defaults within 12 months||Surcharge if annual turnover is less than £150,000||Surcharge if annual turnover is £150,000 or more|
|2nd||No surcharge||2% (no surcharge if this is less than £400)|
|3rd||2% (no surcharge if this is less than £400)||5% (no surcharge if this is less than £400)|
|4th||5% (no surcharge if this is less than £400)||10% or £30 (whichever is more)|
|5th||10% or £30 (whichever is more)||15% or £30 (whichever is more)|
|6 or more||15% or £30 (whichever is more)||15% or £30 (whichever is more)|
There’s no surcharge if you submit a late VAT Return and:
- pay your VAT in full by the due date
- have no tax to pay
- are due a VAT repayment
HMRC can charge you a penalty of up to:
- 100% of any tax under-stated or over-claimed if you send a tax return that contains a careless or deliberate inaccuracy
- 30% of an assessment if HMRC sends you one that’s too low and you don’t tell them it’s wrong within 30 days
- £400 if you submit a paper VAT Return unless HMRC has told you you’re exempt from submitting your return online