|HMRC Reference:Notice 700/60 (June 2014)||View Change History|
This notice cancels and replaces Notice 700/60 (April 2014). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
This notice explains how Payments on Account (POA) works and what you must do if you are notified that you are liable to make payments on account. You are liable for inclusion in POA if:
Sections 3.1, 3.2, 3.4, 4.2 and 5 have been updated to show the new address for the Payments on Account Team.
The name 'VAT Process Owner Team' has changed to 'Indirect Tax Process Team'.
You can find details of any changes to this notice since March 2012 on our website.
Every VAT registered business with an annual VAT liability of more than £2.3 million is required to make payments on account.
Once in POA each business must make interim payments at the end of the second and third months of each VAT quarter. These interim payments are payments on account of the quarterly VAT liability. A balancing payment for the quarter, that is the quarterly liability less the payments on account made, is then made with the VAT return.
The payments on account and the balancing payments must be made electronically, and cleared funds must be in HM Revenue & Customs (HMRC's) bank account by close of business on the due date.
We will calculate your liability to POA, following the rules in paragraph 1.1. We will notify you that you are in POA if your liability exceeds the £2.3 million threshold.
Once you exceed the £2.3 million threshold you will be liable to make payments on account from the quarter following that in which you exceeded the threshold (at the end of the second and third months of the quarter). We will notify you of the amounts to be paid and the due dates for the payments.
We will calculate your payment on account based on your annual VAT liability in the period in which you exceeded the threshold.
The amount of each payment on account is determined by dividing the annual VAT liability in that period, excluding the VAT on imports and goods ex-warehouse, by 24.
If you have been in business for less than 12 months, we calculate the payments on a proportionate basis.
Your payments on account will remain at that level described in paragraph 2.3.1 until the beginning of the next annual cycle for payments on account.
The annual cycle begins in April, May or June each year depending on which VAT return stagger you are on. The amount of your payments on account during the annual cycle is determined by your liability in a period known as the reference year. The diagram below sets out the reference year for each return stagger.
Annual cycle begins
Mar, Jun, Sep, Dec
Year ending Sep
April of following year
Apr, Jul, Oct, Jan
Year ending Oct
May of following year
May, Aug, Nov, Feb
Year ending Nov
June of following year
For example, if you are on stagger 1, your VAT liability for the reference year ending September 2013 will determine the level of payments on account you will be required to make from April 2014 until March 2015.
If your business is registered for VAT in the names of its divisions, each division will be regarded as a separate business for the purpose of POA. The VAT liability of each division will determine whether it should be included in POA and the amount of payments on account required.
If you are one of a number of companies registered for VAT as a group, the VAT liability of the whole group will determine whether it should be included in POA and the amount of payments on account required.
All members of the group are jointly and severally responsible for the payment on account.
The due dates for payments on account are the last working day of the second and third months of every VAT quarterly period, regardless of your period end dates - we will send you a payment schedule listing all your payment dates. If you are in POA, and submit quarterly returns, you will not get the 7 extra days to pay and submit your VAT return, as described on the How to Pay VAT page on our website.
You must make sure that your payments clear to our bank account by these dates or you may be liable to a surcharge for the default - see paragraph 2.5.3.
This means that if, for example, the last day of the month falls on either:
Once you are in POA your quarterly balancing payments (see paragraph 1.3) due with your VAT return must also clear to our bank account by the last working day of the month (but see paragraph 2.4.3 below if you have non-standard period end dates.
For example, if the due date falls on a Saturday, your return payment must have cleared to our account by close of business on the Friday beforehand (or the previous working day when Friday is a bank holiday).
If you have agreed with us to use non-standard period end dates for your returns then your payments must also clear to our account by the due date for those returns. If the due date is not a working day then the payment must be cleared by the last working day before the due date. Working days are Monday to Friday excluding bank holidays.
You must pay your payments on account and VAT return balances by an acceptable electronic payment method. Payment must clear to HMRC's bank account by the last working day of the month. Working days are Monday to Friday excluding bank holidays. If you miss a payment deadline you may be liable to a default surcharge - see paragraph 2.5.3.
There are a number of acceptable electronic payment options available to you. The following information will help you decide which method would most suit your business. Whichever payment method you use, it is important to use your VAT registration number as your reference, as this will make sure that your payments are correctly allocated to your account without delay. You must allow enough time for your payment to clear to HMRC's bank account by the due date.
It normally takes 3 bank working days for payment by Internet/Phone banking, BACS Direct Credit, Standing Order, credit or debit card, or Bank Giro to clear to HMRC's bank account. Bank working days are Monday to Friday excluding bank holidays. You should check with your bank/building society to see how long they take to transfer a payment and what their cut-off time is for initiating payment. If your bank or building society takes longer, you will have to initiate your payment earlier. Late payments are subject to default surcharge.
The Faster Payment Service (FPS) is a service that has been introduced by the banking industry that allows payments by internet or phone banking to be received on the same day or next day, provided the value of the payment does not exceed the limit set by your own bank or building society. Before making a payment using FPS you should contact your bank or building society to confirm the services available to you, any daily value limits and latest cut off times for making a payment.
CHAPS enables you to tell your bank to make a payment that will reach HMRC on the same day provided you initiate payment within the time specified by your bank (usually between 9.00 am and 3.00 pm). CHAPS payments are more expensive than other payment methods but may be of benefit if you are making very large payments.
Use your own bank/building society services to pay by:
To pay by any of these methods you will need to provide your bank/building society with our bank account details:
08 32 00
If you are making a payment from an overseas bank account our International Bank Account Number (IBAN) is:
Bank Identifier Code
Go online to:
The minimum payment is £0.01 and the maximum is £99,999.99. There is a non-refundable transaction charge for payments made by credit card and we do not accept American Express or Diners Club cards.
Or you can pay by:
Please note: There is no facility to make payments on account or balancing payments by the VAT Online Direct Debit service.
You can find further information on how to make payments on account on our website at HMRC: How to pay VAT.
If you fail to make your payments on account and/or fail to pay the balance due with the return in full and on time, we will:
If you are late with any payment on account, or the balancing payment due with the return, you will be in default. We will notify you of each default at the end of the quarterly accounting period and issue a surcharge assessment if appropriate.
We never charge a surcharge without prior written warning. Movement into or out of POA does not affect default surcharge. For example, if you receive a Surcharge Liability Notice for late payment of a return and are then brought within POA you may be charged a surcharge without further warning if any subsequent payment on account or balancing payment is late.
Section 5 below explains what to do if you disagree with our decision to charge a surcharge.
At the end of a VAT quarter we will look back to see if either of the 2 payments on account and/or the balancing payment due with the return were received late. We will add together all late payments to establish the value of the defaults in the quarter unless either:
We will calculate the surcharge as a percentage of the value of all the late payments made during the quarter. You will be surcharged at the rate of 2% of the value of the late payment(s) for the first quarter in default during a surcharge period. The rate of surcharge will then increase progressively to 5%, 10% and 15% if you default in subsequent quarters. You can find more about default surcharge in Notice 700/50 Default Surcharge.
You should file your quarterly returns online in the normal way. Do not adjust any figures on the return to take account of payments on account which you have made.
However, the amount to be paid is the net liability shown on the return less any payments on account that have already been made in for that accounting period.
Repayments that may be due will be made under the normal rules. If your return is a repayment return, the payments on account made in the quarter will also be repaid.
The amount of your payments on account may be adjusted if your total VAT liability decreases or increases by 20% or more (see paragraphs 3.2 and 3.3). You may also be removed from POA if your total VAT liability falls below the threshold (see paragraph 3.4 for details).
If you want us to look again at the amounts due or you think you should be removed from POA, you should write to: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA.
You must not adjust your payments until you have received written notification from us.
If your total VAT liability (excluding the VAT on imports and goods ex-warehouse) is, or will be, less than 80% of the liability we used to calculate your current payments, you may ask us to reduce your payments. This applies to either:
In both cases, write to: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA, giving your reasons why your payments should be reduced. If we are satisfied, we will amend your payments to reflect your reduced VAT liability.
We may increase your payments on account, where the total VAT liability in any year ending after the year on which your payments are currently based, exceeds your previous liability by 20% or more. We will advise you in writing of an increase in payments.
If your payments have been increased, you may apply to have the payments reduced to reflect your current liability provided you meet the conditions of paragraph 3.2. We will use the year on which the payments are presently calculated to decide if you meet the conditions in paragraph 3.2.
If your total VAT liability falls below £2.3 million in your reference year (see paragraph 2.3.2 for an explanation of the reference year), you will be removed from POA 6 months later.
If your reference year ends…
your last payment on account…
in September, and your liability is below the £2.3 million threshold at that point
will be in the following March
continue to make payments on account until then
We will notify you of the effective date of your withdrawal from POA.
If your total VAT liability within any completed year ending after your reference year falls below £1.8 million, you may also apply to be removed from POA.
If you think you should be removed from POA, apply in writing to: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA, giving your reasons why you think you should be removed.
If your business applies to be deregistered for any reason you should contact the Payment on Account Team who will advise you about your continued inclusion in POA.
If making payments on account and submitting quarterly VAT returns does not suit your business you can opt to make VAT returns and payments on a monthly basis. To make the change to monthly returns you can either:
You will be expected to continue making monthly returns for a reasonable period, normally at least 12 months.
If you submit monthly VAT returns you may be allowed up to 7 extra days to pay and submit your VAT return, as described on the How to Pay VAT page on our website. This is the only circumstance in which a business liable to be in POA may be granted the extension to the due date for payment. However, if you move back from monthly returns to quarterly returns, the 7 day extension will not apply and payments on account will be required from the first quarterly accounting period.
As an alternative to paying the notified amount of payments on account or moving to monthly returns, you may opt to pay the actual liability for the previous month without submitting a monthly VAT return.
For example, the payment due at the end of February will be the actual liability for January. This option may be attractive if you have wide seasonal variations in turnover, but if you opt to do this, you will have to use the method of calculation for at least 1 year.
Please note: if you do opt to pay actual monthly liabilities but you are in credit for any particular month, you:
If you wish to use the actual monthly liability contact: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA.
You will be expected to make accurate payments of your monthly liabilities. If we are not satisfied that you are, we may direct you to make monthly returns or to revert to paying the standard amounts of payment on account. If we notify you that you can no longer pay the actual monthly liability, you must revert to paying the interim payments we calculate or make monthly returns.
See Section 5 below for what to do if you disagree with our decision to remove the option to pay actual monthly liabilities.
If you disagree with our decision:
You can either:
You will still be able to appeal to the tribunal if you disagree with the outcome of our review.
For reviews relating to surcharges, write to The Default Surcharge Review Team, HMRC, Crownhill Court, Tailyour Road, Crownhill, Plymouth PL6 5BZ.
For a review of our decision to remove the option to pay actual monthly liabilities, write to: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA.
You can find further information about appeals and reviews on the HMRC website or you can phone the number on the letter telling you of the decision you disagree with. You can find out more about tribunals on the Tribunal Service website or you can phone them on Telephone: 0845 223 8080.
If you disagree with any other aspect of POA such as:
Please write to: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA, giving your reasons for disagreeing with our decision and any additional information you want us to take into account.
Your Charter explains what you can expect from us and what we expect from you. For more information, go to Your Charter.
If you have any comments or suggestions to make about this notice, please write to:
Indirect Tax Process Team
Please note this address is not for general enquiries.
For your general enquiries please phone our Helpline on Telephone: 0300 200 3700.
If you are unhappy with our service, please contact the person or office you have been dealing with. They will try to put things right. If you are still unhappy, they will tell you how to complain.
If you want to know more about making a complaint go to www.hmrc.gov.uk and under quick links, select Complaints and appeals.
HMRC is a Data Controller under the Data Protection Act 1998. We hold information for the purposes specified in our notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.
We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:
We may check information we receive about you with what is already in our records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HM Revenue & Customs unless the law permits us to do so.
For more information go to www.hmrc.gov.uk and look for Data Protection Act within the Search facility.
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