Delay Payment of VAT to HMRC

24th January 2015

Requests for Payment

If you supply goods, the taxpoint for accounting for VAT on these sales is the sooner of:

  • The raising of a tax invoice, or
  • Receipt of payment.

To delay this taxpoint, it will usually, therefore, be beneficial, prior to dispatching goods, to raise a “Request for Payment”,  “Application” or “Proforma Invoice” instead of a valid tax invoice, which will only now be issued when payment is received, or 14 days after delivery, if sooner.

Continuous Supply of Services

Where services are supplied continuously, such as by an accountant to an ongoing client, the option exists, once again, to delay the tax point by issuing a “Request for Payment”, followed by a tax invoice only when the related payment is actually received.

It is usually good practice to obtain advance clearance from HMRC that adopting such a procedure is an acceptable basis for accounting for output tax for that particular business.

Credit Transfer

Usually, the due date for submission of a VAT Return, and payment of the related liability, is the last day of the month following the end of the VAT period. These dates can now both automatically be extended by a further 7 calender days if the VAT is remitted to HMRC by credit transfer. If HMRC are given a standing direct debit authority, to collect payment, this 7 day extension is extended by a further 3 bank working days.

Cash Accounting Scheme

Depending on the level of a trader’s taxable supplies, it may be advantageous to examine whether cashflow could be improved by accounting for VAT using the cash accounting scheme. The affect this will have upon VAT accounting will depend upon the relative and absolute size of a trader’s creditors and debtors.

Monthly Accounting

The accounting period for VAT Returns is normally 3 months. A trader may, however, apply to HMRC to adopt a monthly accounting period instead. This will usually only be of benefit to traders regularly receiving refunds.

Annual Accounting

Similarly, it may be beneficial to review whether the Annual VAT Accounting Scheme is of benefit. As well as smoothing cash outflows and simplifying administration, there may also be a cashflow benefit, depending upon the seasonality of the trade and the amount of pre-agreed monthly payment on account.

HMRC ‘Time to Pay’ Arrangements

Since the economy slid into recession during 2008, where a taxpayer has genuine difficulty in paying any taxes, HMRC encourages them to make contact and arrange a suitable payment plan (time to pay arrangement). HMRC will review and rule on such requests on a case by case basis, after they assess whether or not they believe the business to still be viable. Although repeat arrangements can be granted, this should not be adopted as a legitimate method to regularly delay payment of VAT to HMRC.



 
Other items in Blogs
 
Richard Alecock
11th May 2018 Bury St. Edmunds and Mildenhall clients attend the last in our MTD Seminar series

Thursday evening saw the last in our successful series of MTD seminars, held at Memorial Hall in Newmarket, where we had another great turnout. We explained to our clients and guests the implication of  MTD that launches for VAT registered businesses over the VAT threshold starting in April 2019 and how those changes would directly…

Read More »

Rebecca Marley
9th May 2018 iZettle – Taking payments has never been so easy

iZettle was founded in Stockholm in 2010 and have attempted to revolutionise mobile payments with the first mini chip card reader and software for mobile devices. Their commerce platform for small businesses in Europe and Latin America provides tools to get paid, sell smarter and grow your business. Some of the huge benefits are: Automatically…

Read More »

Donna Gidney
9th May 2018 Latest MTD seminar held at our March office

The latest of our series of MTD seminars was held at the March office last night. This was well attended and gave clients an overview of MTD and what it means for them. The presentation was followed by a Xero demonstration, which highlighted the benefits of moving to a cloud based package over and above…

Read More »

Amanda Newman
3rd May 2018 MTD delayed further is not the case

HMRC have recently issued further information regarding MTD , stating prioritising EU exit work is delaying plans to introduce further digital services for individuals. This however ONLY affects simple assessment and real time tax code changes, HMRC are still striving to encourage further uptake of personal tax accounts. Simple assessment was intended to take two…

Read More »

Richard Alecock
1st May 2018 Bury St. Edmunds and Mildenhall clients attend latest MTD Seminar

Friday evening saw the next in our series of MTD seminars, held at our Bury St. Edmunds office, where we had a full turnout. We explained to clients the implication of  MTD that launches for VAT registered business over the VAT threshold starting in April 2019 and how the changes would directly affect them, as…

Read More »

Stephen Malkin
1st May 2018 CITB Levy: Changes in calculation basis

Builders will probably now be aware that the basis for calculating how much their annual payment is under the Construction Industry Training Board (CITB) has recently changed:     Old Basis New Basis Levy on employees 0.5% 0.5% Levy on labour only sub-contractors 1.25% 0% Levy on payments to sub-contractors with Net CIS status 0%…

Read More »