Many VAT Penalties apply to late filings, a failure to do something which have been done (such as registering for VAT) or meeting a deadline.
The penalty points system allows HMRC to apply penalty points when a VAT return is filed late. You collect points based on the method and lateness of filing and, when you reach five points, you receive a £200 fine.
Aside from penalty points, HMRC can also issue penalties for late payments. Penalties are calculated as an amount the VAT due, had it been paid on time:
Where 15 days have passed, the penalty is calculated as 2% on the VAT you owe at day 15
Where 31 days have passed, the penalty is calculated as 2% of what was outstanding at day 15, plus 2% of what is still outstanding at day 30, plus a daily rate of 4% per year on the money owed until it is repaid.
HMRC can also issue more serious penalties where it finds there has been fraudulent evasion of VAT. These are also referred to as section 69C penalties. These types of penalties often accompany a VAT Assessment and officers of the company can be made personally liable to pay them if the company does not.
The amount of the section 69C penalty is calculated at 30% of the potential lost VAT. However, HMRC will still attempt to recover the full amount of that VAT debt through it VAT Assessment procedure. HMRC will seek recovery of the full penalty in addition to the Assessment.