HM Revenue and Customs (HMRC) record a ‘default’ if they do not receive your VAT return by the deadline. Or 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
HMRC will write to you explaining any surcharges you owe and what happens if you default again.
How Much You’ll Pay
| 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) |
| 6th | 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 overclaimed 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 using your VAT online account or Making Tax Digital compatible software
