Over 500,000 businesses filed their VAT returns late last year

With over half a million VAT returns filed late by businesses last year, accounting firm UHY Hacker Young has warned of the penalties which can reach up to 15 per cent of the entire VAT bill and increase 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, warned Sean Glancy, VAT & indirect taxes partner at UHU Hacker Young. 

HMRC does, however, still have to determine what will qualify as a ‘reasonable excuse’ for the late filing and payment of VAT.

"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," said Mr Glancy. 

He explained that with businesses required to file and pay their VAT at the same time,  the majority of those who have filed their VAT returns late are likely to have paid late too. 

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. 

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

"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."