From 1 January 2023, HMRC will introduce a fixed rate, points based penalty system for VAT submissions. Initially HMRC has said there will be a 'light touch' approach to the new regime in the first year of operation.

Under the new rules, there will be a single penalty point for each late submission of a VAT return. When a business has exceeded the points threshold, a fixed rate penalty of £200 will be issued for each subsequent late return.

For businesses on standard quarterly returns the threshold is four points in any two-year period. For those on monthly returns, it will be five points and for those submitting annual VAT returns, just two points.