Monday, 21 July 2008

Spreading The VAT Burden

As the credit crunch continues to bite, an increasing number of companies are finding that the ‘once a quarter’ cash flow burden of paying their VAT bill all in one go is placing mounting pressure on the purse strings.

As with many other regular bills, wouldn’t it be great if we could spread the payments over a number of months, to help us to budget more effectively.

As accountants, we are dealing with more and more ‘time to pay’ arrangements on behalf of our clients.

HM Revenue & Customs have no plans to formally relax the rules by giving companies extensions on paying their quarterly VAT bill. They have, however, confirmed that businesses do, subject to certain criteria, have the option to spread the payments.

So, what are the criteria?

As soon as you realise you need to make a payment arrangement, you should contact your local office immediately. Alternatively, you can contact the Payment Helpline, on 01274 539 628, during office hours.

Making a Proposal

If you agree to pay the amount in full, within 28 days, no further action is required.

If you require longer, you will need to provide details of;

• Your savings and other assets, for payment arrangements of up to 3 months, and;
• Your income, spending, savings and other assets, for payment arrangements longer than 3 months.

Your Rights

HMRC will consider any payment arrangements you request. If you feel they’ve rejected it without considering it properly, you can make a complaint, but you can’t appeal against their decision.

Things to Remember

• HMRC will only entertain payment arrangement proposals if all returns (whether VAT or tax) are up to date.
• You will have to pay interest on any tax or VAT paid late. The current rate is 8.5% PA

So, although HMRC don’t really like it, and you may have to pay interest, and provide additional information, this could be an invaluable means of budgeting your VAT payments, thereby keeping the wolf from the door.

Free advice on arrears and dealing with HMRC is available through the charities; Citizens Advice Bureau, and TaxAid, by following these links.

Citizens Advice Bureau


If in doubt, always seek the advice of these agencies, or your own accountant.