VAT late payment
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VAT late payment
VAT late payment considerations
VAT late payment considerations
Here are our five tips for dealing with the situation if it looks as if you are going to struggle to pay your next VAT return on time.
VAT returns should always be submitted on time, even if it is not possible to pay the tax. A business can encounter all sorts of problems if it allows HMRC to issue an assessment (estimate of VAT liability in absence of a return) that subsequently proves to be too low.
If possible, make a part-payment to show willingness to settle the liability i.e. just like making a payment on account to a supplier
Never write out a cheque that might be bounced by your bank. As a policy issue, HMRC never resubmit a cheque to a bank and a bounced cheque immediately creates a big problem for the taxpayer.
Explain the reason for late payment to HMRC as soon as possible. Find the address of your local debt management unit from the HMRC helpline (tel. 0845-010-9000) and send an immediate letter to explain the circumstances of your non-payment.
Always make a firm proposal as to how (and when) you propose to settle the VAT arrears. As an additional measure, it is also worthwhile to explain to HMRC the efforts being made to ensure future VAT payments will be made on time.
What happens if you are late settling your VAT dues?
HMRC will issue a default surcharge. How much depends on the number of times you have defaulted in the past.
The first time you default on payment you will be issued with a Surcharge Liability Notice. No surcharge is payable on this occasion but any subsequent defaults will incur surcharges of:
in relation to first such period - 2% of tax outstanding
in relation to second such period - 5% of tax outstanding
in relation to third such period – 10% of tax outstanding
in relation to fourth and subsequent periods – 15% of tax outstanding
Two important points to recognise are as follows:
no penalty is issued in relation to the 2% and 5% periods if the amount of the penalty would be £400 or less
a penalty is based on the amount of tax that is unpaid by the due date – it is therefore worthwhile making a payment on account.
VAT returns should always be submitted on time, even if it is not possible to pay the tax. A business can encounter all sorts of problems if it allows HMRC to issue an assessment (estimate of VAT liability in absence of a return) that subsequently proves to be too low.
If possible, make a part-payment to show willingness to settle the liability i.e. just like making a payment on account to a supplier
Never write out a cheque that might be bounced by your bank. As a policy issue, HMRC never resubmit a cheque to a bank and a bounced cheque immediately creates a big problem for the taxpayer.
Explain the reason for late payment to HMRC as soon as possible. Find the address of your local debt management unit from the HMRC helpline (tel. 0845-010-9000) and send an immediate letter to explain the circumstances of your non-payment.
Always make a firm proposal as to how (and when) you propose to settle the VAT arrears. As an additional measure, it is also worthwhile to explain to HMRC the efforts being made to ensure future VAT payments will be made on time.
What happens if you are late settling your VAT dues?
HMRC will issue a default surcharge. How much depends on the number of times you have defaulted in the past.
The first time you default on payment you will be issued with a Surcharge Liability Notice. No surcharge is payable on this occasion but any subsequent defaults will incur surcharges of:
in relation to first such period - 2% of tax outstanding
in relation to second such period - 5% of tax outstanding
in relation to third such period – 10% of tax outstanding
in relation to fourth and subsequent periods – 15% of tax outstanding
Two important points to recognise are as follows:
no penalty is issued in relation to the 2% and 5% periods if the amount of the penalty would be £400 or less
a penalty is based on the amount of tax that is unpaid by the due date – it is therefore worthwhile making a payment on account.
Viewed: 1427 TimesDate: 10/06/2008