The VAT default surcharge

Question

We are a manufacturing company and so far we have always managed to get our VAT returns and payments in on time. But times are hard and delays in payments by our customers are having an impact on our cash flow. I am aware that there is a penalty for submitting VAT returns and making VAT payments late. What is the penalty and what’s the best way of avoiding it?

Answer

The penalty is known as the default surcharge. You are in default if you submit a VAT return or make the related payment after the due date. The penalty is a percentage of the amount of the late payment so it follows that the submission of a late return on its own (i.e. payment is made on time) will not give rise to...