Quick! Get organised with paying VAT
Legislation in the Finance Act 2009 changed the effective date of payment when payments are made by cheque. This legislation has now commenced with effect from 1 April 2010. This means that any cheques received by HMRC for payments of VAT (and only VAT at present) will be treated as made when cleared funds are received by the department, and not when the cheque was received.
The change has been timed to coincide with the introduction of mandatory electronic filing and payment for many business. However, there is a “gap” between the last paper returns and the new mandatory online process, which businesses should be aware of.
The mandatory online process commences on 1 April 2010 in respect of VAT accounting periods commencing on or after that date. So let’s assume that your VAT quarter ends on 30 April. Your return for the period ended 30 April 2010 will not be affected by the mandatory online filing rules, so can be filed on paper. However, as the due filing date is 31 May the return and cheque will be affected by the new payment rules, so the cheque must be sent in sufficient time to allow it to clear by 31 May. HMRC recommends allowing three working days for the post and three working days for the cheque to clear. As Monday 31 May is a bank holiday, this would mean posting the cheque on Thursday 20 May to allow time for it to clear, otherwise the trader could be liable to a default surcharge.
The same issue will apply to returns for periods ending 31 March and 31 May – both of which are not caught by the mandatory online process, but which will be affected by the new rules about paying by cheque.
Businesses would be better advised to make payment by other means; for VAT electronic payment can be made by Bank Giro in addition to other more widely recognised electronic payment methods such as CHAPs or Direct Debit.