Surcharges and penalties

HM Revenue and Customs (HMRC) record a ‘default’ if:

  • they do not receive your VAT return by the deadline
  • full payment for the VAT due on your return has not reached their account by the deadline

Surcharges

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

If you submit a late return, you will not have to pay a surcharge if you:

  • pay your VAT in full by the deadline
  • have no tax to pay
  • are due a VAT repayment

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 do not 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)

Penalties

HMRC can charge you a penalty of up to:

  • 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy
  • 30% of an assessment if HMRC sends you one that’s too low and you do not 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