Payments on account

HMRC Reference:Notice 700/60 (June 2014) View Change History
 

Contents

Foreword

1. Introduction

1.1 What is this notice about?

1.2 What’s changed?

1.3 How does POA work?

2. Payments on account

2.1 Will I be in POA?

2.2 When will I start making payments on account?

2.3 Amounts of payments on account to be made

2.4 Due dates for payments

2.5 Making payments

2.6 How do I complete my quarterly VAT returns under POA?

3. Changes in business circumstances

3.1 What do I do if my business circumstances change?

3.2 Decrease in payments on account liability

3.3 Increase in payments on account liability

3.4 Removal from POA

4. Alternatives to Payments on Account

4.1 Monthly returns

4.2 Actual monthly liability

4.3 Removing the option to pay actual monthly liabilities

5. Disagreements

Your rights and obligations

Do you have any comments or suggestions?

Putting things right

How we use your information

 

Foreword

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.

1. Introduction

1.1 What is this notice about?

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:

  • you account for VAT by quarterly returns
  • in any period of 12 months or less you have a total liability of more than £2.3 million
    The £2.3 million includes VAT on imports and goods ex-warehouse.

This notice and others mentioned are available on our website www.hmrc.gov.uk.

1.2 What’s changed?

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.

1.3 How does POA work?

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.

2. Payments on account

2.1 Will I be in POA?

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.

2.2 When will I start making payments on account?

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.

2.3 Amounts of payments on account to be made

2.3.1 How much will I need to pay on account?

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.

2.3.2 How long will my payments on account remain at that level?

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.

Stagger


Quarter ends


Reference year


Annual cycle begins


1


Mar, Jun, Sep, Dec


Year ending Sep


April of following year


2


Apr, Jul, Oct, Jan


Year ending Oct


May of following year


3


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.

2.3.3 What happens if my liability increases or decreases after my payments on account have been set?

We may adjust the amount of your payments on account if your total VAT liability decreases or increases by 20% or more (see paragraphs 3.2 and 3.3).

2.3.4 What if my business is registered in divisions?

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.

2.3.5 What if my business is registered as part of a group?

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.

2.4 Due dates for payments

2.4.1 Due dates for payments 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:

  • a weekend, you must make your payment in time to clear to our account by the previous Friday
  • a bank holiday, your payment must clear to our account by the previous working day

2.4.2 Due dates for quarterly balancing payments

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).

2.4.3 Due dates for non-standard quarterly balancing payments

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.

2.5 Making payments

2.5.1 Electronic payments

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.

2.5.2 How do I make payments?

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:

  • Internet or Phone Banking
  • BACS Direct Credit
  • CHAPS
  • Faster Payments

To pay by any of these methods you will need to provide your bank/building society with our bank account details:

Sort Code


Account Number


Account Name


Bank


08 32 00


11963155


HMRC VAT


Citi


If you are making a payment from an overseas bank account our International Bank Account Number (IBAN) is:

IBAN


Bank Identifier Code


Bank


GB25CITI08320011963155


CITIGB2L


Citi


Go online to:

Use BillPay to pay by debit or credit card

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:

  • Standing order - you can either use the setting-up form that's available on the HMRC website or your own bank or building society's internet or phone banking service (our bank account details are shown above). Whichever form you use, you must provide your VAT registration number as the payment reference
  • Bank Giro - to use this option you need to ask HMRC to send you a book of paying-in slips that are pre-printed with your VAT registration number and HMRC's bank account details. You can do this by email or by Telephone: 03000 519206. It can take 4 to 6 weeks for VAT Bank Giro paying-in slips to be printed and sent to you. If you need to make a payment before your paying-in slips arrive then you'll have to pay by one of the other electronic payment methods described above

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.

2.5.3 What if I do not make my payments on time?

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:

  • immediately take action to recover the debt
  • consider whether a Default Surcharge is chargeable
  • consider transferring you from quarterly to monthly returns

2.5.4 How does Default Surcharge apply to POA?

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.

2.5.5 How is the amount of surcharge calculated?

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:

  • this is the first default in a 12 month period when we will issue you with a Surcharge Liability Notice
  • you have a reasonable excuse for late payment

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.

2.6 How do I complete my quarterly VAT returns under POA?

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.

3. Changes in business circumstances

3.1 What do I do if my business circumstances change?

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.

3.2 Decrease in payments on account liability

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:

  • any completed year ending after the year on which your current payments are based (that is, a backward look at your VAT liability)
  • any year which has started but not yet ended (that is, a forward look)

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.

3.3 Increase in payments on account 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.

3.4 Removal from POA

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.

For example:

If your reference year ends…


your last payment on account…


you must…


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.

4. Alternatives to Payments on Account

4.1 Monthly returns

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.

4.2 Actual monthly liability

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:

  • will not receive an immediate repayment but will have to bring the credit forward to the VAT return as normal
  • cannot net off the credit in 1 month against the liability for the next month to reduce the amount of payment
  • should consider switching to monthly returns if you are often in credit and you require immediate repayments of credit

If you wish to use the actual monthly liability contact: Payment on Account Team, 7th Floor, Regian House, James Street, Liverpool L75 1AA.

4.3 Removing the option to pay actual monthly liabilities

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.

5. Disagreements

If you disagree with our decision:

  • to remove the option to pay actual monthly liabilities (see paragraph 4.3)
  • to charge a surcharge (see paragraph 2.5.4)
  • on the way the amount of surcharge has been calculated (see paragraph 2.5.5)

You can either:

  • ask for your case to be reviewed by an officer not previously involved in the matter
  • appeal to an independent tribunal within 30 days of the letter telling you of the decision you disagree with

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.

You can find more about default surcharge reviews and appeals in Notice 700/50 Default Surcharge.

If you disagree with any other aspect of POA such as:

  • your business being included in POA (see paragraph 2.1)
  • the date from which your business is included within POA (see paragraph 2.2)
  • the amounts of payments on account you have been notified to pay (see paragraph 2.3)

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 rights and obligations

Your Charter explains what you can expect from us and what we expect from you. For more information, go to Your Charter.

Do you have any comments or suggestions?

If you have any comments or suggestions to make about this notice, please write to:

Indirect Tax Process Team
1st Floor
Regian House
Liverpool
L75 1AD

Please note this address is not for general enquiries.

For your general enquiries please phone our Helpline on Telephone: 0300 200 3700.

Putting things right

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.

How we use your information

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:

  • check the accuracy of information
  • prevent or detect crime
  • protect public funds

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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