News Item: Paying VAT by cheque – a warning
HMRC have announced a change to the way by which they will process VAT payments. From 1 April, they will treat all cheques sent to them by post as having been received on the date when cleared funds reach HMRC’s bank account. This is a notable departure from the previously generally accepted principle that the date of receipt of the cheque counts as the date of payment.
From 1 April businesses will have to allow enough sufficient time for their payments to reach HMRC and for the cheque to be cleared no later than the due date shown on their VAT returns. Cheques that do not clear by the due date may give rise to a liability to a surcharge for late payment. HMRC advise that businesses should allow three days for the cheque to reach them and then a further three working days for the cheque to clear. This is all very well but does not:
- Take account of any postal delays: we have seen letters from HMRC taking up to two weeks to arrive when sent by 2nd class post;
- Give any guidance as to what the appeal procedure will be - or even if an appeal can now be made against a penalty imposed for late payment.
The change does not affect cheque payments made by bank Giro.
HMRC recommend that VAT payments be made electronically, which in most cases affords businesses up to seven extra calendar days in which to make payment. Paying by direct debit provides at least ten additional days.
Individuals and businesses who file their VAT returns online must pay electronically - but do not confuse the new payment regime with the new online filing of VAT returns. The payment procedures are amended for payments due on or after 1 April whereas the online filing of VAT returns applies to return periods beginning on or after 1 April 2010.