CH193120 | Penalty reform - penalties for failure to pay VAT on time from 1 January 2023: how late payment penalties work: overview

NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”

All taxpayers, regardless of the tax regime, have a legal obligation to pay their tax by the due payment date for that tax. Where a person fails to pay the full amount of tax by the due date, they may become liable to a penalty or penalties.

There are two late payment penalties that may apply: a ‘First penalty’ and a ‘Second penalty’.

The person will not incur a late payment penalty if the outstanding VAT is paid within the first 15 days after the due date, or if a Time to Pay (TTP) agreement is made as a result of proposals made before the end of the 15-day period.

See CH193160 for the effects of agreeing a TTP and what happens if the person breaks the TTP.