HMRC internal manual: Compliance Handbook
- Introduction of Late Payment Penalties: Effective January 1, 2023, the UK implemented a new penalty system for late VAT payments, introducing a first late payment penalty for amounts unpaid after 15 days, set at 3% for periods starting after May 31, 2025, with a second penalty of 10% accruing daily after 31 days overdue.
- Penalty Structure: Businesses that fail to pay VAT on time will incur penalties based on their payment status. If payment is made between 16 and 30 days overdue, a first penalty is applied. If payment remains outstanding after 31 days, a second penalty begins to accrue until the amount is paid or a Time to Pay (TTP) proposal is accepted.
- Regulatory Framework and Compliance: The new penalties aim to enhance compliance and reduce the tax gap. Businesses are encouraged to communicate with HMRC regarding TTP agreements to mitigate penalties. The system emphasizes the importance of timely payments and accurate VAT management to avoid financial repercussions.
Source gov.uk
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