The first step towards alignment of VAT and direct tax penalties was due to take place in just two months but yesterday the government announced a delay. What’s the full story?

HMRC’s original timetable for the harmonisation of its late filing penalty and late payment interest regimes across most direct and indirect taxes was due to start on 1 April 2022 with the scrapping of the VAT surcharge rules. Following the announcement by the Treasury on 13 January this has been put back by nine months until 1 January 2023.

When the new rules take effect late filing penalties will be charged using a points system. Points will be added to a taxpayer’s record for each late filing and penalties will escalate the more points are racked up. For late payments there will be varying charges according to how late each payment is.

HMRC’s updated guidance about the new penalty and interest rules can be viewed here and here.

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