HMRC has updated its guidance on late VAT payments.
Late payment interest is charged from the first day that the payment is overdue until the day it’s paid in full. It is calculated at the Bank of England base rate plus 4%. The rate has increased from 2.5%.
Interest is charged on all late payments where VAT is due. This includes amounts overdue following:
- a VAT Return
- an amendment or correction of a return
- a VAT assessment made by HMRC
- a missed VAT payment on account
Interest will also be charged on all penalties if they are overdue including:
- late payment penalties for late payment of VAT
- late submission penalties for not submitting a return on time
Where an amount due is paid in instalments, such as a Time to Pay arrangement, HMRC charges interest on the outstanding balance until the tax is paid in full.