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Over 500,000 businesses filed their VAT returns late last year – up 13%

Publications featured in include: City AM

The penalty regime for the late filing and payment of VAT can result in hefty fines up to 15% of the entire VAT bill. This penalty increases each time the VAT bill is paid late. 

Although HMRC have promised a more sympathetic approach to the late payment of VAT during Covid, it hasn’t promised a blanket exemption for all businesses. HMRC now has to determine what will qualify as a ‘reasonable excuse’ for the late filing and payment of VAT – the concern is that HMRC may not waive all of these fines. 

Businesses are required to file and pay their VAT at the same time, meaning that the majority of those who have filed their VAT returns late are likely to have paid late too. This increases their chances of being hit with fines unless they get in contact with HMRC. 

For businesses that have fallen behind on their VAT bills, this will only add to the other bills which have accumulated due to Covid. These could include deferred rent, repayments of CBILS and BBLS loans and other deferred tax bills through Time to Pay arrangements. 

Sean Glancy, partner at our London office says: “For businesses that have filed their VAT returns late, it’s only a matter of time before the harsh reality of receiving a penalty kicks in.

HMRC will impose penalties even if VAT bills are paid one day late, demonstrating the importance it places on businesses paying on time.

Businesses shouldn’t take HMRC’s more sympathetic approach during the pandemic as a free pass. Where possible, they should try to keep on top of their VAT bills, as there’s no guarantee HMRC will accept their excuse for filing or paying late.”

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