Massive fine for making VAT payment one day late

In a recent case considered by the courts a company was fined £297,845 for being one day late in paying their VAT.

The case highlights the unpredictable, and seemingly harsh outcomes of HMRC’s VAT surcharging rules.

If you pay your VAT on time, whether quarterly or monthly, and you make sure that you file your VAT returns in good time, before the filing deadlines, you need have no fear of incurring VAT surcharge liabilities. They only arise if you are a late filer or late payer.

A key point to remember is that the VAT default surcharges increase each time a default occurs: from 2%, 5%, 10% and 15%. The only way to reset the penalty clock back to zero is to be free of default events for a complete calendar year.

In the case highlighted in this article, the company had various past default events and had reached the 10% penalty band. It’s VAT liability was £2,978,459, and therefore the penalty was £297,845.

Unfortunately, the company could produce no compelling excuse for the late payment and the court upheld the surcharge.

Whilst the outcome of this case was exceptional, £297,845 seems an extraordinary amount to pay for being one day late in settling a bill, it is a salutary reminder to file and pay VAT returns before the due dates so that you do not find yourself on the default surcharge treadmill. And if you do default, redouble efforts to file and pay on time for a full year to reset the default clock to zero.


“It was the year 1979 little did we know then , how important is the role of the financial controller. In 1991 our co director died suddenly….his name was Ramon, He was like a brother to me. Our challenge was the company accounts and the financial control , which Ramon being accountancy trained did so well and professionally. Zak became our Rock when Ramon died, and we were comforted. Knowing the business as Zak did, we continued doing what we do best , working in the business And knowing the financial statements and cash at bank was being handled by Zak we continued to grow.

Thank you Zak, for always being there for us, and stepping in and helping us through those very difficult emotional and financial times, without you we would not be as successful as we are today. You are there for us 24/7 And the pride you deliver with your financial control which is exceptional and is beyond just doing the numbers. You are very special to us”
Joe Mastroianni, Director, The Kingston Riding School