Commentary

V7.298A Default surcharge/late returns and payments

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.298A Default surcharge/late returns and payments

Part V7 Tax planning | Commentary

V7.298A Default surcharge/late returns and payments

A replacement for the default surcharge regime was introduced into the legislation at F(No 3) A 2010, ss 26 and 27 and Schs 10 and 11. However, at the time of writing it has not yet been implemented. Before looking at the replacement regime in detail we will look at the existing default surcharge regime.

The legislation covering the existing default surcharge regime is at VATA 1994, ss 59, 59A and 59B.

What happens when returns and payments are made late?

Many clients will sometimes face a cash flow problem – which means either paying suppliers on time (to keep the flow of goods coming into the business) or paying the quarterly VAT return on time (and keeping HMRC happy).

Note – the starting point for any business that is unable to pay its tax bill is to contact HMRC's Business Payment Support Service (BPSS) and negotiate a time to pay arrangement.

The question that clients often ask is: 'What will happen if I pay my VAT late?' The approach taken by HMRC in relation to late VAT returns and payments is as follows.

  1.  

    •     Surcharge liability notice – on the first occasion that a return or payment is submitted late, a taxpayer will be issued with a surcharge liability notice. This notice confirms that he is in default in respect of a VAT period, and that if another default occurs within the next 12 months, he will be liable to a default surcharge

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