Key takeaways
- New VAT penalty system: From January 1, 2023, HMRC introduced new late submission and late payment penalties, replacing the old surcharge system.
- Healthcare VAT exemptions expanded: From May 1, 2023, VAT exemptions now include medical services supervised by pharmaceutical staff.
- Zero-rated medicines extended: Prescription drugs supplied under Patient Group Directions (PGDs) are now zero-rated for VAT.
There have been a number of changes to the UK VAT system in 2023, most notably to the VAT penalty regime, VAT exempted goods, and zero rated VAT. Here’s a closer look at the updates to UK VAT this year.
Changes to UK VAT penalties
On January 1, 2023, HMRC implemented late VAT payment penalties as well as points-based late VAT return submission penalties. These updates replace the default VAT surcharge and apply to accounting periods that begin after January 1, 2023. The new VAT penalties are as follows:
Late submission penalties: For every VAT return submitted late, a penalty point will be levied. When the penalty point threshold is reached, a £200 penalty will be charged. Each subsequent submission will incur a £200 penalty (once the threshold is reached).
Late payment penalties: Businesses will be required to pay a late payment penalty if their VAT payment is more than 15 days overdue. Once this reaches 30 days, the late payment penalty will increase and a second late payment penalty will be added to that.
For more information about the new VAT penalty regime, head over to the HMRC website.
Healthcare VAT exemptions extended
From May 1, 2023, UK VAT rate exemptions relating to various healthcare services were extended. They now include those carrying out medical services that are supervised by pharmaceutical staff.
Also, the zero rated VAT rate was extended to include prescription medications that have been supplied via the Patient Group Directions (PGDS).
Frequently asked questions
What are the new UK VAT penalties introduced in 2023?
As of January 1, 2023, HMRC applies a points-based penalty system for late VAT returns and new charges for late payments. Reaching the penalty threshold results in a £200 fine, with further penalties for continued delays.
Which healthcare services are now VAT exempt in the UK?
From May 1, 2023, VAT exemptions were extended to include medical services supervised by pharmaceutical staff, and zero-rated VAT now applies to prescription medicines supplied under Patient Group Directions (PGDs).
