What is the default surcharge for VAT?
Answered 17 March 2026
Here is a comprehensive answer on the VAT default surcharge:
VAT Default Surcharge
What the law says
Under s.59 Value Added Tax Act 1994 (VATA 1994), a taxable person is in default in respect of a prescribed accounting period if, by the last day required for filing:
- HMRC has not received the VAT return; or
- HMRC has received the return but has not received the VAT shown as payable on it.
How the surcharge regime is triggered:
When a person first defaults, HMRC serves a Surcharge Liability Notice (SLN), specifying a surcharge period ending on the first anniversary of the last day of the defaulting period. If a further default occurs within an existing surcharge period, that period is extended by a further 12 months.
The surcharge amount:
If the taxable person defaults again within the surcharge period and has outstanding VAT, they become liable to a surcharge equal to the greater of £30 or a specified percentage of their outstanding VAT.
The specified percentages under s.59(5) VATA 1994 are:
| Default within surcharge period | Rate |
|---|---|
| 1st | 2% |
| 2nd | 5% |
| 3rd | 10% |
| 4th and subsequent | 15% |
Reasonable excuse:
A person will not be liable to a surcharge if they can satisfy HMRC or a tribunal that there is a reasonable excuse for the return or VAT not having been despatched in time, or that it was despatched in such a manner that it was reasonable to expect it would be received within the time limit.
HMRC guidance / practice
The default surcharge is described as "a civil penalty to encourage businesses to submit their VAT Returns and pay the tax due on time".
In practice, HMRC applies the following administrative thresholds:
- There is a minimum surcharge of £30 for surcharges calculated at the 10% and 15% rates.
- HMRC does not issue a surcharge at the 2% and 5% rates if the calculated amount is less than £400.
Citation sources
ngly, for the purposes of this section, that existing period and its extension shall be regarded as a single surcharge period. 4 Subject to subsections (7) to (10) below, if a taxable person on whom a surcharge liability notice has been served— a is in default in respect of a prescribed accounting period ending within the surcharge period specified in (or extended by) that notice, and b has outstanding VAT for that prescribed accounting period, he shall be liable to a surcharge equal to whicheve
hich he is so liable as has not been paid by that day. 7 If a person who, apart from this subsection, would be liable to a surcharge under subsection (4) above satisfies the Commissioners or, on appeal, a tribunal that, in the case of a default which is material to the surcharge— a the return or, as the case may be, the VAT shown on the return was despatched at such a time and in such a manner that it was reasonable to expect that it would be received by the Commissioners within the appropriate
Default surcharge is a civil penalty to encourage businesses to submit their VAT Returns and pay the tax due on time. This notice explains: how to avoid a surcharge how default surcharge works when we apply a default surcharge what to do if you think you’ve a reasonable excuse for submitting your VAT Return or payment late You can find further information about VAT Returns and payments of tax in the VAT guide (Notice 700).
ed the surcharge period during the period 01/21. 56. Section 59(4) VATA provides that if a person defaults in respect of a period ending within a surcharge liability period and has outstanding VAT for the period, he becomes liable to a surcharge. This is an amount which is the greater of £30 and a percentage of the outstanding VAT. The £30 surcharge thus might, for example, apply where the return showed VAT due to the taxpayer. 57. Section 59(5) VATA specifies the rates of penalty for any furthe
Part IV Administration, collection and enforcement Default surcharges and other penalties and criminal offences The default surcharge. 59 1 Subject to subsction (1A) below if, by the last day on which a taxable person is required in accordance with regulations under this Act to furnish a return for a prescribed accounting period— a the Commissioners have not received that return, or b the Commissioners have received that return but have not received the amount of VAT shown on the return as payab