If you are registered to pay VAT then it is your responsibility to make sure your returns are submitted and paid on time. For this reason, it is essential you understand the basics of how to make payments to avoid any unexpected surprises or late payment of VAT.
What are the Deadlines for Filing and Paying your VAT Returns?
Unless a business is in trouble with HMRC or receives regular repayment then it will normally submit its VAT returns quarterly or annually.
- Quarterly – If you submit your VAT returns on a quarterly basis then you must file your return online with HMRC and pay your bill by midnight one calendar month and seven days after the end of the quarter. That means, for a quarter ending 31 March, the deadline for filing your return and paying your bill is 7 May.
- Annually – Some businesses use the Annual Accounting Scheme for VAT purposes. In that case, you submit one VAT return a year. During the year you make advance payments: usually nine monthly payments of 10%, or three quarterly payments of 25%, of the previous year’s VAT bill, or of an estimate if you have been registered for less than 12 months. You pay any balance with the annual return. If you use the Annual Accounting Scheme, your VAT return must be filed and paid two months after the end of your accounting period.
- Monthly – HMRC can allow or direct monthly VAT returns, and businesses that usually receive repayments often ask for them. Separately, a business whose annual VAT liability exceeds £2.3 million is normally required to make interim payments on account during each VAT quarter, unless it switches to monthly returns. For monthly returns, you have to file your return and make your payment one month and seven days after the end of the period. So, if your period ends on 31 December, your return and payment are due by 7 February of the following year.
Making VAT Payments
Once you have submitted your VAT return, you will either be due to a repayment or you will have to make a payment to HMRC. The easiest way to make a VAT payment is to set up a Direct Debit. If you set it up at least 3 working days before you submit your return, HMRC collects the VAT due automatically 3 working days after the payment deadline. Repayments do not go through the Direct Debit; HMRC pays them to the bank account in your VAT registration details, or sends a cheque.
There are a number of other payment methods available but you will need to make those manually. Bank transfers must reach HMRC’s account by the payment deadline, so you need to know how long each method takes.
- Same or next day payments – Faster Payments by online or telephone banking (these reach HMRC at weekends and on bank holidays too), and CHAPS on a working day;
- Three working days – Bacs payments usually take three working days to clear;
- On the day you pay – HMRC counts online payments by debit card or corporate credit card on the day you make them, even at weekends. It does not accept personal credit cards. Payments at your bank or building society count on the day you make them, Monday to Friday.
If the payment deadline falls on a weekend or a bank holiday, Bacs and CHAPS payments must reach HMRC’s account by the last working day before it, and a payment at your bank must be made by that day. Faster Payments reach HMRC at weekends and on bank holidays, but can take until the next day, so do not leave them until the deadline day. Online payments by debit card or corporate credit card count on the day you make them, even on the deadline day.
Need Advice?
Are you struggling to make a VAT payment? Perhaps you need advice about asking HMRC for more ‘Time to Pay’. Alternatively, you may be concerned your business is insolvent. Whatever your concerns, please get in touch on 0208 444 3400 for confidential, no-obligation advice.