The new penalty system was due to come into effect from 1 April 2022 but this has now been delayed by nine months until January 2023.

In a statement to MPs, Lucy Frazer, financial secretary to the Treasury, said: ‘In Finance Act 2021, the government legislated to reform penalties for late submission and late payment of tax, initially from 1 April 2022, and to align interest charges for VAT with other major taxes.

‘Today, I am announcing that these changes for VAT businesses will now be introduced nine months later, on 1 January 2023.

‘HMRC is committed to becoming one of the most digitally advanced tax authorities in the world. The ambition and pace of change needs to be balanced with well-tested systems and good customer service, particularly when businesses are facing additional challenges and uncertainty.