Section A: Objective Test

Under the new VAT penalty regime (effective for periods starting on or after 1 January 2023), a company submits its VAT return on time but pays the £10,000 VAT liability 20 days late.

What is the late payment penalty charged by HMRC?

Under the new VAT penalty regime (applicable from 1 Jan 2023): - Up to 15 days late: No penalty. - 16 to 30 days late: A first penalty of 2% is calculated on the amount outstanding at day 15. - 31 days or more late: An additional 2% is calculated on the amount outstanding at day 30 (making 4% total), plus a second penalty calculated daily at 4% per annum on the outstanding balance. Since the payment was made 20 days late, it was outstanding at day 15. The penalty is 2% x £10,000 = £200.