A total of 519,120 VAT returns were filed late by businesses last year, up 13% from 459,190 the previous year, leaving many SMEs exposed to interest and penalties on their outstanding bills, according to UHY Hacker Young.
The penalty regime for the late filing and payment of VAT can result in fines up to 15% of the entire VAT bill. This penalty increases each time the VAT bill is paid late.
UHY said that although HMRC has promised a more “sympathetic approach” to the late payment of VAT during Covid, it hasn’t “promised a blanket exemption for all businesses”.
The group added that HMRC now has to “determine what will qualify as a reasonable excuse for the late filing and payment of VAT”.
Sean Glancy, partner at UHY Hacker Young, said: “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.”
“HMRC will impose penalties even if VAT bills are paid one day late, demonstrating the importance it places on businesses paying on time.”
He added: “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.”