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ACCA Strategic Professional · Advanced Taxation (UK) · Taxation effects of the financial decisions made by businesses and individuals

A VAT-registered trader pays £50,000 of VAT 45 days after the due date. Under the ATX-UK tax tables, which statement about the late payment penalty is correct?

A penalty of 6% of the unpaid VAT (£3,000) applies, plus a daily penalty at an annual rate of 10%. Payment more than 30 days late falls in the highest band, which has both elements. Paying eventually in full does not remove the penalty.

  1. AA 3% penalty of £1,500 applies, with no further charge
  2. BA penalty of 6% (£3,000) applies, plus a daily penalty at an annual rate of 10% on the unpaid VATCorrect
  3. CNo penalty applies because the VAT was eventually paid in full
  4. DA penalty of 6% (£3,000) applies with no daily element

Explanation

More than 30 days late attracts the top band: 6% plus a daily penalty at an annual rate of 10%. The 6% element is £3,000. The daily element is added on top, so the 6%-only option is incomplete.

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