Value Added tax Surcharges

Value Added Tax (VAT) Surcharges

When a business is VAT registered it will have to submit VAT return normally once a quarter and pay over the VAT that is owed by the end of the following month, there is a little longer to pay this over if you pay by direct debit.


Should you not submit you VAT return on time then the following surcharges may apply:

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 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

What happens if you cannot pay?

The first option you could consider is to call the time to pay helpline and get permission to pay this over on monthly direct debit payments.

If  you are due a rebate from other taxes e.g. corporation tax, personal tax then speak to the tax office as they may be able to transfer the rebate from the to your VAT liability.

If you have other taxes due at the same time paying your VAT first will be a better option as with corporation tax there is only interest charges on late payments compared to the above surcharges.

Open a business savings accounts and if you want to rename this VAT Accounts and depending what VAT Scheme you are on:

Invoicing Scheme-every time you raise an invoice move the VAT to this account.

Cash Accounting scheme-every time you receive a payment then move the VAT element across to this account.

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