ill of course need to keep an eye on certain tax laws and keep your business in a proper accounting condition. If you are registered for VAT, you have to meet the relevant deadlines for VAT returns and payments and, depending on your turnover, interact with the HMRC.
Maria
Last Updated on 26 January 2024
HMRC VAT payment dates
When you, as an online seller, have to make your VAT payments depends on your accounting or payment method. Here we distinguish between quarterly payments, the annual accounting scheme, and payments on account, each of which we will discuss in more detail below. Monthly submission of VAT returns is also possible for online sellers. All payment methods have their own special features, which you must take into account in your online business accounting.
Quarterly payment
The traditional method of paying your VAT is based on four VAT returns per year, at the end of each quarter. Your payments are due together with your VAT return – which means you should instruct the transfer at least one or two working days in advance to be on the safe side. Penalties may apply retroactively in the event of late payments.
Please note that you always transfer the amount that is entered on your VAT return as the tax liability for the quarter – even if advance payments have already been made and you would therefore still have a credit balance. Any overpayment can be returned to you as a VAT refund, but you are not allowed to deduct it from your tax payments.
Annual accounting scheme
Traditionally, VAT-registered companies file their VAT returns four times a year, as just described. The annual accounting scheme is different. Here, these four returns are waived and replaced by one per year. Nevertheless, you have to make several advance payments during the year. The amount is determined by your last submitted advance VAT return or estimated if your business is new.
When you submit your next advance VAT return, it will be offset against the advance payments and you will either receive money back if you have paid too much in advance or you will pay the difference if you have paid too little tax in advance. If your business usually pays more VAT than it takes in, the annual accounting scheme makes little sense for you, as you will only receive one VAT refund per year instead of four.
To apply for the annual accounting scheme, you must have an annual turnover of less than £1.35 million. You can apply as usual to HMRC, who should normally approve it if you meet the requirements.
Payments on account
Companies that exceed an annual VAT payment burden of £2.3 million must make advance payments to HMRC. For this purpose, VAT returns must be submitted to HMRC on a quarterly basis, i.e. four times a year. The advance payments amount to 1/24 of the estimated annual liability and must be paid to HMRC in the second and third month of each VAT quarter. The last possible date for payment is the last working day of the second and third month of each quarter.
In case of payments on account you are not allowed to pay seven days later in case of electronic payment method. This special permission does not apply in this case.
The payments on account rule starts in the first quarter after you have exceeded the £2.3 million threshold. However, your payments remain the same until the start of the next annual cycle. The month in which your VAT quarter ends will determine when your next annual cycle begins.
The following table reveals when your next annual cycle begins:
Source: https://www.gov.uk/guidance/vat-payments-on-account
Monthly VAT returns
If quarterly or annual payments do not fit your business model, you can apply for monthly VAT returns. In this case, if you use an electronic payment method, you are allowed to remit VAT up to seven days after the due date. Once you have chosen the monthly payment method, you may be required to use it for one year before you are allowed to change to another frequency. You can apply for monthly VAT returns using form VAT 484.
Late payments
If HMRC received your remittances late, you will face appropriate consequences. HMRC will take action to collect the debt immediately, penalise you with a late payment penalty (also called surcharge), or change your payments from quarterly to monthly. Pay attention to your deadlines to avoid the consequences.
You can’t pay your VAT payments?
In the event that you cannot pay your VAT payments at the moment, you have the option of contacting HMRC and arranging a Time to Pay Arrangement (TTP). You can negotiate a way to pay off the due payment in instalments. Provided you have always paid on time in the past and your business has not otherwise attracted negative attention, there is a good chance that HMRC will agree to your request.
If you find yourself unsure about which VAT payment method aligns best with your business needs or if you have specific questions regarding VAT compliance, it’s always a wise choice to seek professional advice. Consulting with experts from hellotax can provide you with invaluable insights and guidance tailored to your unique situation. They specialise in VAT compliance and can help you navigate the intricacies of VAT payments, ensuring that you make informed decisions that benefit your business while maintaining full compliance with UK tax regulations. Don’t hesitate to reach out to hellotax for further information and expert assistance.
Payment methods:
How to pay VAT in the UK
Now you already know when you have to make your VAT payments to HMRC. But how can you actually make your VAT payments? HMRC offers you a few different options that should simplify your payment.
The payment methods at a glance:
- Faster Payment, CHAPS or Bacs
- From an overseas bank account
- Corporate debit or corporate credit card
- At your bank or building society
- Standing order
Faster Payment, CHAPS or Bacs
If you have a UK bank account you can make payments to HMRC via Faster Payments, CHAPS or Bacs. To do this, you will also need your nine-digit VAT registration number. A payment via Faster Payment (online or telephone banking) will usually be received by HMRC on the same day or the day after, whether on a working day or a weekend day. Payments using CHAPS are received on the same business day, provided you make the transfer within your bank’s business hours. If you pay via Bacs, the transfer will take up to three business days.
From an overseas (non-UK) bank account
It is also possible to pay your VAT liability from a non-UK bank account using their bank identifier code (BIC) and account number (IBAN). You will need to use your nine-digit VAT registration number as the payment reference. Please note that these account details are different from the ones you would use paying from a UK-based bank account.
Corporate debit or corporate credit card
Payments to HMRC can also be made by corporate debit or corporate credit card. Please note that these payments are subject to non-refundable fees. When making your payment, you will need to provide your nine-digit VAT registration number and expect the transfer to take three business days.
Standing order
In case you use the annual accounting scheme or make payments on account, you can also pay via standing order (sometimes referred to as direct debit). You should obtain permission for this method of payment directly when applying for the annual accounting scheme. Once you have received permission from HMRC, you can issue the standing order via form VAT 622 or via online or telephone banking.
Summary
As a business VAT-registered online seller in the UK, you have a comparatively wide range of options for making your VAT payments – whether it’s in the frequency of your VAT returns and payments, or in the payment method itself. So you, as an online seller, can easily find a model that suits you and your online business. The only important thing is that you submit your advance returns on time and make your payments within the deadlines. When navigating the complexities of VAT compliance, VAT returns, and related questions, consider the support of services like hellotax, tailored to the needs of online sellers. They can assist you with expert guidance and solutions specifically designed to address the VAT requirements of online sellers.
