A company submits its VAT return and payment 10 days late. It is the company's first default. What is the consequence under the VAT default surcharge regime?

Answer options:

2% penalty

5% penalty

Surcharge Liability Notice

£100 fixed penalty

How to approach this question

Recall the VAT default surcharge rules. The first late payment/return triggers a warning notice, not an immediate fine.

Full Answer

C.Surcharge Liability Notice✓ Correct

Under the default surcharge regime, the first default (late return or late payment) results in HMRC issuing a Surcharge Liability Notice (SLN). This acts as a warning and lasts for 12 months. No financial penalty is charged for the first default.

Common mistakes

Assuming a financial penalty applies immediately on the first default.

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Practice the full ACCA TX — Taxation Practice Exam 6

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