5 Things You Should Know About Late VAT Payments – What Happens if I Missed the Deadline?

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Is it better late than never? When it comes to VAT payments, this is only half-true. Late payments of VAT to the HMRC has consequences like financial penalties, which can be quite heavy for a business. The due date to submit and pay VAT returns in the UK is the 7th day of the month. Through your HMRC online account, you can check there your VAT return submission and payment deadline. If you miss the VAT deadline, here are five things you should know.


VAT Payment #1. You get a warning the first time you default.  

A business is considered to have defaulted when the HMRC does not receive the VAT Return. This form needs to be submitted even if sales are zero or if it shows that the company is due to receive some credit from the government. Another way a VAT-registered business can be considered in default is if the full payment of the VAT was not submitted when it was due.

Fortunately, the HMRC does not dole out punishments straight away IF it the first time the business defaulted within 12 months. Instead, the HMRC will send a letter reminding you that your VAT obligations are overdue, and you will need to make the required VAT payments.


2. Small businesses get an extra break.

Take note of the amount of £150,000. This is a special number when it comes to VAT because it could mean extra assistance. A company that has a taxable turnover of over £150,000 gets a grace period, while a company that makes less than this can make special arrangements with the HMRC for assistance in fulfilling its VAT obligations. Only when a second default occurs within the next 12 months will the HMRC send out a Surcharge Liability Notice to these smaller entities.


VAT Payment #3. Defaults can trigger financial penalties.

The penalty for late VAT payments is sometimes called VAT surcharges. These are fees that a business has to pay in addition to the taxes it originally owed the government. It is important to note that the more extended VAT payment is delayed, the more the penalties are. The surcharge depends on two things: the amount of VAT that is left unpaid and the company’s annual turnover.

If a company defaults again, a Surcharge Liability Notice is sent out. It informs the business that it is under a surcharge period over the next 12 months. Missing another deadline within this period means that the business may be fined. The surcharge period then continues for another 12 months.


4. The government looks into “reasonable excuse”.

According to the default surcharge guidelines of the HMRC, companies that have a reasonable excuse for failing to timely meet their VAT obligations and tried to amend this failure without delay are not liable to surcharges.

The law does not define what situations are deemed acceptable in the forgiveness of penalties. It is assessed on a case to case basis.


5. You can make arrangements to pay the money owed in chunks.

A company that is unable to pay for the amount due immediately is not without recourse. The HMRC does have the option of providing a Time to Pay arrangement. This is a situation where a business can settle its tax obligations through monthly payments rather than pay the entire amount at the same time.

This recourse usually lasts 12 months and does not absolve the company of its upcoming VAT obligations. Basically, the company needs to cover its tax obligations in addition to the amount indicated in the repayment scheme.


VAT Payment Thoughts

There is a saying that says that there are only two inevitable things in life: death and taxes. Delaying death can be a good thing but in taxes? Not so much. However, if you do catch yourself in a situation where you miss the required VAT payments, knowing what to expect can help mitigate the damage.


If you are seeking more of this content and how you can repurpose your business financial or more business planning and cash management so that it would snugly fit into the present world situation, Annette & Co. is here to offer you a FREE consultationAnnette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis. Before you make any drastic decisions, seek out a professional’s opinion. You can also follow us on any of our social media channels.


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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.