Filing a Late VAT Return

VAT (Value Added Tax) must be submitted in full to HMRC each and every month on time. Paying your VAT past due is not a good idea and routine offenders can suffer from extremely high and costly penalties. Following is important information regarding filing a late VAT return.
The Penalties

Generally speaking, HMRC demands that you submit a full payment for VAT each month, any late payment that is submitted can and usually will include a penalty unless there is a valid reason why a VAT was not submitted in a timely manner. The first time you are late submitting your VAT in a 12 month period, you will receive a warning letter from HMRC. In this letter, HMRC will confirm that a VAT payment was submitted late and include a schedule of further penalties in the case that you are a repeat offender over the next 12 months.

If you are late two times in a 12 month period, you will be required to pay a penalty of 2% on your VAT payment. If you are late three times in a 12 month period, the penalty will rise to 5% of your VAT payment. Further lateness in a 12 month period will continue rising from 5% to 10% to 15%.

Once you get your VAT payment back on track and submit them correctly in time for a 12 month period, your penalty will reset back to zero penalty with a warning.
Avoid the Penalty Charge

In certain circumstance, you may be able to avoid a penalty charge by stating a reasonable excuse. It should be noted that every case is handled differently, however some reasonable excuses that have arisen in VAT tribunals are:

* No money to pay the VAT due to a large amount of the VAT coming from a customer that has not paid
* Lost, stolen or damaged records
* The employee responsible for submitting your VAT payments fell seriously ill or was seriously injured

Avoid a Full Penalty by Submitting Partial Payment

It should be noted that if you are not able to pay the full amount of your VAT tax, send in a partial payment consisting as much as you can reasonably afford. You can always work out a partial payment plan with HMRC. In addition, only the amount that was not paid in full will be subject to penalties.
What is Not Considered an Excuse when Submitting a Late VAT Payment

It should be noted that an excuse that is not accepted for being late on your VAT payments is that you relied on others to do it. For instance, if your accountant or an employee of your business failed to submit the VAT on time, HMRC will not excuse the lateness and will charge you a penalty. It is up to you to figure out a way to be reimbursed. Many times a contract with an account handling to send in a VAT will state the consequences if he or she is unable to submit the VAT amount on time; this may result in charging less time, etc.
One Simple Way to Give Your Business Extra Time to Pay Your VAT

It should also be noted that if you want to give yourself the most time possible to pay off your VAT, pay your VAT online. If you pay your VAT online you get an extra seven days to pay. In many cases, seven days is enough time to sort things out, make a payment and avoid penalties from HMRC.

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Source: http://www.contractorcalculator.co.uk/filing_late_vat_return.aspx