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ACCA Strategic Professional · Advanced Taxation (UK) · Tax advantages and disadvantages of alternative courses of action

Quill Ltd paid its VAT of £60,000 more than 30 days late. Its director suggests that, to avoid any penalty, the company should have paid within 15 days, and asks what the penalty is for lateness beyond 30 days. Using the ACCA Finance Act 2025 tax tables, which description of the penalty is correct?

The penalty is 6% of the VAT, which is £3,600, plus a daily penalty at an annual rate of 10% on the unpaid tax. This applies where payment is more than 30 days late. The 3% rate applies only to payments 16 to 30 days late.

  1. A6% of the VAT, being £3,600, plus a daily penalty at an annual rate of 10%Correct
  2. B3% of the VAT, being £1,800, plus interest at 8.50%
  3. C£3,600 only, with no daily element
  4. D10% of the VAT, being £6,000, only

Explanation

For payment more than 30 days late the penalty is 6% plus a daily penalty at an annual rate of 10%. 6% of £60,000 is £3,600. The 3% rate applies only to 16 to 30 days, and the daily element must be added, so the other options are wrong.

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