Value Added Tax Act 1994 section 59A

Default surcharge: payments on account

Section 59A establishes a default surcharge regime for businesses that are required to make payments on account of VAT, imposing escalating penalties when those payments are late or when VAT returns are not submitted on time.

• A business is in default if a required payment on account of VAT is not received in full by HMRC by the due date, or if the business would otherwise be in default under the standard default surcharge rules
• HMRC can issue a surcharge liability notice creating a surcharge period running from the date of the notice to the anniversary of the last day of the relevant accounting period, with successive defaults extending the period
• The surcharge is the greater of £30 or a percentage of the aggregate value of defaults, starting at 2% for the first default within the surcharge period and rising through 5% and 10% to a maximum of 15% for the fourth and subsequent defaults
• A person can avoid the surcharge by demonstrating that the payment was dispatched in time to reasonably expect it would arrive by the due date, or that there was a reasonable excuse for not dispatching it