HM Revenue and Customs Brief 14/10
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Issued 17 March 2010
VAT payments by cheque – important changes with effect from 1 April 2010
From 1 April 2010 all cheque payments sent by post will be treated as being
received by HM Revenue & Customs on the date when cleared funds reach our bank
account – not the date when we receive the cheque. This means that businesses
must allow enough time for their payment to reach us and to clear into our bank
account no later than the due date shown on their VAT return. A cheque takes
three bank working days to clear – excluding Saturdays, Sundays, and bank
To allow for possible postal delays (for which we are not responsible)
businesses should allow at least three working days for a cheque payment to
reach us and a further three days for the payment to clear our bank account.
A business may be liable to a surcharge for late payment if a cheque payment
does not clear by the due date shown on their VAT return.
This change does not affect any cheque payments made by Bank Giro. Payments
by Bank Giro are treated as electronic which means that businesses will get up
to an extra seven calendar days for the cleared payment to reach us (unless they
use the Annual Accounting Scheme or are required to make Payments on Account).
The reason for this change
From 1 April 2010 businesses with an annual turnover of £100,000 or more
(exclusive of VAT) and all newly registered businesses must file their VAT
returns online and pay any VAT due electronically. The purpose of the change to
the cheque clearance rules is to encourage compliance with the requirement to
pay electronically by removing the cash flow advantage currently enjoyed by
businesses paying by cheque. This change is also intended to make electronic
methods of payment more attractive to those businesses who are not required to
file their VAT returns online and pay electronically from 1 April.
We recommend that businesses make their VAT payments electronically as this
is safe and secure and in, most cases, gives up to seven extra calendar days to
pay or, if paying by Direct Debit, at least ten extra calendar days. This extra
time does not apply to businesses if they use the Annual Accounting Scheme or
are required to make Payments on Account. Please remember that if a VAT return
is filed online then any VAT due must be paid electronically. To find out more
about how to pay electronically use the link at the end of this Brief.
The legal basis for the change
Section 58B of the VAT Act 1994 and section 95 of the Finance Act 2007 allow
HMRC to make regulations to define when payments by cheque are regarded as made.
The relevant regulation is regulation 5 of the Value Added Tax (Amendment)
(No.4) Regulations 2009 which came into force on 1 December 2009 and applies to
all cheque payments sent in the post to us on or after 1 April 2010.
For more information about paying VAT, payment deadlines and the full range
of payment options go to How to pay VAT
About the Author
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Article Published/Sorted/Amended on Scopulus 2010-06-14 12:01:34 in Tax Articles