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If your business is value-added tax registered, it is important to make payments of VAT on time, in addition to submitting VAT returns in a timely manner. Failure to do this could mean that you receive a surcharge. If you believe that you will have difficulty making your payment by the due date, you should immediately contact HMRC, which may be able to help. You can also take steps to help yourself.


Claim back VAT on bad debts

If you have clients who have failed to make payment for goods and services provided by your business, you may be able to claim back the VAT paid. There are criteria to fulfil before you make a claim. You must have accounted for and paid VAT on the sale. There must be at least six months between the due date of the client’s payment and making a claim for repayment. The details of the account and VAT invoice must have been retained by you. When you make the claim, complete box four of the VAT return and enter the amount you are claiming. However, if you make a claim and then the late payment is made, you must repay the VAT amount.

Help from HMRC

If you are experiencing payment problems for the first time, you could contact the Business Payment Support Service. If you have an existing arrangement with HMRC and are experiencing further difficulties, contact the office you are currently dealing with.

Actions to take if experiencing payment problems

Although you are having problems making VAT payments on time, you must still submit your VAT returns in a timely manner. You should also inform your financial adviser and bank manager that you are experiencing difficulty. Make a payment to HMRC, even if it isn’t the full amount, as this will reduce the amount of the penalty or surcharge you receive. The calculation of the surcharge or penalty will be based on the amount of VAT you owe, so making any payment you can will reduce it.

Alternative VAT schemes

There are schemes available that could make it easier to manage VAT payments. The Cash Accounting Scheme lets you pay VAT on the goods or services paid for by clients, rather than on all goods including those you have issued invoices for but not been paid.

The Annual Accounting Scheme lets you make monthly or quarterly VAT payments based on the estimated annual amount. Although HMRC will assist where possible, it is important to pay VAT before the due date to avoid extra charges.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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