Default surcharge

Produced by Tolley
Default surcharge

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Default surcharge
  • What are defaults?
  • Businesses that will not be liable to the default surcharge
  • Businesses that cannot pay by the due date
  • Accounting schemes
  • Payments on account
  • Non-UK businesses registered under MOSS in respect of B2C supplies made in the UK (until 1 January 2021)
  • What happens if a business defaults?
  • Small businesses
  • Calculating the surcharge
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the default surcharge regime and when it will be applied. The default surcharge can be applied when a business submits its VAT return and / or payment after the due date.

HMRC has published a new manual called VAT Default Surcharge Officer’s Guide which can be accessed via the following link VDSOG100.

What are defaults?

Businesses are legally required to submit their VAT return and any payment by the due date shown on the online screen or the VAT return for any businesses that are still able to send in paper returns (see the Submitting online VAT returns guidance note). The due date is normally one calendar month after the end of the VAT return period.

Businesses will be in default if HMRC has not received the following by the due date:

  1. the VAT return (please note that the business will still be in default if the return is a nil or repayment return)

  2. the full amount due on the VAT return as cleared funds in HMRC’s account

A business should consider introducing systems that will enable it to ensure that it does not incur a default surcharge because the return and / or payment was late.

The business should consider setting up electronic payments, such as a direct debit or using the faster payment system as this will help to ensure that the payment reaches HMRC on time.

The business can also consider using the reminder system on HMRC online services as this will help to

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