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HM Revenue and Customs Brief 14/10


HM Revenue and Customs -Tax Authorities

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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 holidays.

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.

Further information

For more information about paying VAT, payment deadlines and the full range of payment options go to How to pay VAT .

About the Author

Crown Copyright 2010.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2010-06-14 12:01:34 in Tax Articles

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