Non-payment of deferred VAT

A financial penalty may be charged if you did not take any action to pay your deferred VAT in full, or failed to make an arrangement to pay by the deadline of 30 June 2021.

The legislative framework for the penalty is contained in the Finance Act 2021 section 99 and schedule 19.

The penalty is calculated based on the amount of unpaid deferred VAT. The penalty is charged at 5% of the deferred VAT that is unpaid when the penalty is assessed.

However, it is possible to negotiate with HMRC over payments, particularly in light of the impact of covid-19 on businesses. The latest guidance states that businesses can make an arrangement to pay either by joining the VAT deferral new payment scheme or by contacting HMRC to agree extra help to pay.

Once a penalty assessment is received, businesses have 30 days to make payment to settle the outstanding VAT charge.

How to appeal against a penalty

There are various options for appeal, including citing ‘reasonable excuse’ for late or non-payment, and businesses can also request a statutory review. This means that the tax decision reviewed by someone at HMRC who was not involved in the original decision.

The penalty decision could either be upheld, changed or cancelled.

If all these avenues fail to reach resolution, appeals can be taken to the First Tier Tribunal, where the case will be heard by a panel of tax judges.