Value Added Tax Act 1994 section 21

Default surcharge: notice of special surcharge period

Section 21 explains when a person using a special VAT scheme is considered to be in default for a tax period and how HMRC can impose a special surcharge period as a consequence.

• A person is in default if they fail to submit their special scheme VAT return by the deadline and HMRC (or the relevant EU member state tax authority) has issued a reminder, or if they submit the return on time but fail to pay the VAT shown as due and a reminder of the outstanding amount has been issued.
• When a default occurs, HMRC may serve a special surcharge liability notice on the person, which triggers a special surcharge period running from the date of the notice until the first anniversary of the last day of the tax period in question.
• If a further default occurs during an existing special surcharge period, any new notice served extends and continues the existing period rather than creating a separate one — the two are treated as a single special surcharge period.
• The surcharge regime applies specifically to relevant special scheme returns and works alongside further provisions in paragraphs 22 and 23 of Schedule 9ZE, which deal with the financial surcharge itself and certain exceptions.