What is a VAT Surcharge?

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What is a VAT Surcharge

What is a VAT Surcharge?

A VAT Surcharge is a type of penalty levied by HMRC under two circumstances:

  1. When a business does not submit their VAT return on time
  2. If full payment for VAT due on a particular return has not reached HMRC by the deadline.

How are VAT Surcharges Calculated

HMRC calculates the amount of surcharge due as a percentage of the VAT outstanding for the VAT quarter that is in question.

Here is how VAT surcharges are calculated:

Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more
2nd No surcharge 2% (no surcharge if this is less than £400)
3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400)
4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more)
5th 10% or £30 (whichever is more) 15% or £30 (whichever is more)
6 or more 15% or £30 (whichever is more) 15% or £30 (whichever is more)

There’s no surcharge if you submit a late VAT Return and:

  • pay your VAT in full by the due date
  • have no tax to pay
  • are due a VAT repayment

It is also worth nothing that you DO NOT pay a surcharge if you submit a late VAT return or VAT payment for the first time. 

Related:

A Complete Overview of VAT Penalties. Surcharges & Interest