A UK VAT-registered business submits quarterly VAT Returns and, under HMRC's points-based penalty regime that applies to VAT accounting periods starting on or after 1 January 2023, has already accumulated 3 penalty points for previous late submissions. It then submits another VAT Return late. Under this regime, what happens?
- Nothing happens yet, because points only start converting into financial penalties once a business reaches 10 accumulated points, regardless of return frequency
- The business receives an automatic £400 penalty immediately, since any missed deadline after the first point always carries a fixed monetary penalty
- The points system does not apply to VAT at all; late VAT returns are still penalised only under the old default surcharge regime
- The business reaches 4 points, the penalty point threshold for quarterly filers, triggering a £200 penalty, with a further £200 penalty applying for each subsequent late return while it remains at or above that threshold
Why D? And why not the others?
Correct answer: D. The business reaches 4 points, the penalty point threshold for quarterly filers, triggering a £200 penalty, with a further £200 penalty applying for each subsequent late return while it remains at or above that threshold
Under HMRC's points-based penalty regime for VAT accounting periods starting on or after 1 January 2023, a quarterly filer's penalty point threshold is 4 points, so a business that already has 3 points and then submits another return late reaches that threshold and triggers a £200 penalty, with a further £200 penalty applying to each additional late return submitted while it remains at or above the threshold. The option citing a 10-point threshold applies the wrong figure and the wrong logic; the threshold that matters varies by filing frequency (2 for annual filers, 4 for quarterly filers, 5 for monthly filers), and 10 points is not the relevant number for any filer under this regime. The option describing an automatic £400 penalty for any late return after the first point misunderstands the regime's structure, which accumulates points below the threshold without a monetary penalty and only imposes the fixed penalty once the threshold itself is reached or exceeded. The option claiming the points system does not apply to VAT is simply wrong, since this regime was introduced specifically to replace the previous default surcharge system for VAT late submission and late payment.
Source: GOV.UK (HMRC internal manual): Compliance Handbook — penalty points and penalties for VAT