Appealing a VAT late submission penalty point

Q: How might an appeal work in practice?

Illustration only. A quarterly filer receives a fourth point and a £200 penalty for a late June return. Looking back, it finds that its first point was for the first return after it registered for VAT, which gov.uk says the rules do not cover. It appeals against the £200 penalty and asks for that first point to be cancelled too, even though 30 days have long passed since that point was notified. If the first point goes, the business held only 2 valid points before June, so the June failure takes it to 3 points, below the threshold of 4, and the £200 penalty falls away.

You can appeal against a VAT late submission penalty point, and separately against the £200 penalty charged once you reach your points threshold, under paragraph 22 of Schedule 24 to the Finance Act 2021. A valid ground is either that the point or penalty should never have been given, for example because the return was not late or was not covered by the rules, or that you had a reasonable excuse. You normally have 30 days from the decision letter to accept HMRC’s offer of a review or to appeal to the tax tribunal.

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What exactly can you appeal against?

The points system applies to VAT accounting periods starting on or after 1 January 2023 and covers nil and repayment returns as well as returns showing tax to pay. Each late return earns one point until you reach the threshold for your filing frequency: 2 points for annual returns, 4 for quarterly and 5 for monthly. At the threshold you are charged a £200 penalty, and another £200 for each further late return while you stay there. The mechanics are covered in VAT penalty points.

Paragraph 22 of Schedule 24 gives two separate rights of appeal: against HMRC’s decision that you are liable to a penalty point, and against its decision that a penalty is payable. HMRC tells you about each point and each penalty in a penalty decision letter. There is one exception. When you change how often you file, HMRC adjusts your points (for example, plus 1 point when moving from quarterly to monthly), and gov.uk and HMRC’s Compliance Handbook at CH192340 both confirm you cannot appeal those adjustments.

What counts as a valid ground of appeal?

Grounds fall into two groups. The first is that HMRC got the facts or the law wrong, so no point or penalty should exist at all:

The return was not late. An online VAT return is usually due one calendar month and 7 days after the end of the accounting period. Check the date HMRC recorded against your submission receipt.
The return was outside the rules. gov.uk says late submission penalties do not apply to your first return after registering, your final return after cancelling your registration, or one off returns covering a period other than a month, quarter or year, such as a four month return when moving from quarterly to annual filing.
You were already at the maximum. Paragraph 5(8) says no further point is due once you hold the maximum for that group of returns. Paragraph 5(2) also limits VAT filers to one point per month, however many returns in that month were late.
The point was awarded too late. Paragraph 6(3) to (5) stops HMRC awarding a point more than 48 weeks (annual filers), 11 weeks (quarterly) or 2 weeks (monthly) after the failure. CH192180 notes that this limit applies to when HMRC awards the point, not when it tells you.
The £200 penalty was charged below the threshold. Under paragraph 15, the penalty only arises when the late return takes you to, or occurs while you are at, the maximum number of points.

The second group is reasonable excuse, which the next section covers.

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How does reasonable excuse work for a late VAT return?

Paragraph 19(1) says no liability to a point or a penalty arises if you satisfy HMRC, or on appeal the tribunal, that you had a reasonable excuse for the failure. Paragraph 19(2) then sets three limits that apply across HMRC’s modern penalty codes:

an insufficiency of funds is not a reasonable excuse unless it is attributable to events outside your control;
relying on someone else, such as a bookkeeper, is not a reasonable excuse unless you took reasonable care to avoid the failure;
once the excuse ends, you keep its protection only if you put things right without unreasonable delay.

The law does not define the phrase. CH192380 sends HMRC officers to the general reasonable excuse guidance at CH160000, which lists examples such as an unexpected hospital stay, the death of a close relative, a failure of HMRC’s online service and loss of records through fire, flood or theft. See what counts as a reasonable excuse for the general picture and illness as a reasonable excuse for health related claims.

A successful excuse also helps with clearing points. Paragraph 8(7), inserted by the Finance Act 2026, treats a return covered by a reasonable excuse as made on time when HMRC tests your period of compliance. How to clear VAT penalty points explains that test.

Should you appeal the point now or wait for the £200 penalty?

Paragraph 24(2) lets the tribunal, on an appeal against a £200 penalty, also cancel any of the earlier points that led to it. Under paragraph 24(3) this works even if the time limit for appealing those points has expired, but not if an earlier appeal already upheld that point. CH192360 repeats this.

That safety net is useful, but waiting has costs. Every unchallenged point counts towards the threshold and stays on your record until it expires or you clear it, and an excuse is easier to evidence while records are fresh. Appealing each doubtful point as it arrives is usually cleaner.

Two further rules are worth knowing. If the tribunal cancels both a penalty and the point behind it, paragraph 24(4) and (5) allow HMRC to award a point for any later late return you made while you appeared to be at the maximum, within 12 months after the decision. And paragraph 6A, added by the Finance Act 2026, lets HMRC cancel a point itself; any penalty that depended on that point then falls away, although HMRC may award a point for the same failure again.

How do you ask for a review or appeal?

For VAT, the decision letter offers an internal review. gov.uk says you have 30 days to accept that offer or appeal to the tax tribunal, and the quickest way to accept is through your VAT online account. If you cannot use it, you can write to Solicitor’s Office and Legal Services, HMRC, BX9 1ZT, saying which penalty you are challenging and why. Statutory reviews and the tax tribunal compares the two routes.

Section 83F of the VAT Act 1994 gives HMRC 45 days to conclude a review, unless you agree another period. If it misses the deadline, the review is treated as upholding the decision.
Under section 83G(3), once a review has concluded you have 30 days from the date of the conclusion letter to appeal to the tribunal. You cannot appeal while the review is running.
A late appeal needs the tribunal’s permission under section 83G(6). See late appeals.
Paragraph 23(2)(a) of Schedule 24 means you do not have to pay the £200 before your appeal is decided, and CH192340 confirms an agent can appeal or ask for a review on your behalf.

Set out the facts with dates, attach evidence such as the submission receipt or a hospital letter, and explain how the event stopped you filing.

How might an appeal work in practice?

Illustration only. A quarterly filer receives a fourth point and a £200 penalty for a late June return. Looking back, it finds that its first point was for the first return after it registered for VAT, which gov.uk says the rules do not cover. It appeals against the £200 penalty and asks for that first point to be cancelled too, even though 30 days have long passed since that point was notified. If the first point goes, the business held only 2 valid points before June, so the June failure takes it to 3 points, below the threshold of 4, and the £200 penalty falls away.

Which arguments rarely succeed?

Not having the money to pay the VAT shown on the return. A return can be filed without paying, and lack of funds is excluded by paragraph 19(2)(a) unless caused by events outside your control. See lack of money as a reasonable excuse.
Blaming an accountant or bookkeeper without showing you checked the return had gone in.
Finding HMRC’s online system too difficult, not receiving a reminder, or a mistake on the return, all of which gov.uk lists as not counting.
Arguing the return was a nil or repayment return, since gov.uk confirms these are included.
Asking for a reduction because the penalty seems harsh. Schedule 24 has no special reduction paragraph like the one in the older late filing rules. CH192440 describes a separate HMRC discretion not to award points or assess penalties, but says it is used only in particular cases and is wholly separate from appeals.

What mistakes weaken a VAT penalty appeal?

Missing the 30 day window and then having to persuade the tribunal to allow a late appeal.
Filing the outstanding return weeks after the excuse ended, which undermines the claim under paragraph 19(2)(c).
Describing a problem without explaining how it actually prevented filing on the due date.
Assuming points disappear if ignored. Points below the threshold expire only after the relevant period, and points at the threshold need a full period of compliance.
Appealing an adjustment made on changing filing frequency, which cannot be appealed.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.