VAT returns and payments are going online

10 March 2010

Businesses need to be aware that significant changes to the way that VAT returns are filed and payments are made will be coming into effect very soon.

As from 1 April 2010, businesses that have an annual turnover exclusive of VAT of over £100,000 and businesses that register for VAT on or after 1 April will need to submit their VAT returns and make any due payments electronically.

Businesses that meet either category must file and pay online even if nil payments are due and even if turnover drops below the £100,000 threshold in the future.

Firms with an annual VAT exclusive turnover above £100,000, as of 31 December 2009, should have received a letter from HMRC informing them of the switch to electronic filing.

HMRC will have calculated a qualifying firm's turnover by reviewing the returns submitted up to 31 December 2009.

For businesses that are already registered and whose turnover remains below £100,000, the option to file by paper will still be open to them. HMRC is to review the situation between now and 2012 when it may become the case that all VAT-registered businesses will have to file and pay electronically.

Some firms will be exempt even if they meet the new criteria. They will be: subject to an insolvency procedure; or run entirely by owners whose religious beliefs preclude them from using a computer.

HMRC has also announced that, as from 1 April 2010, all cheque payments by post will be treated as being received on the date when the cleared funds reach HMRC's bank account.

This means that VAT businesses which can still pay by post must allow enough time for the payment to reach HMRC and to clear no later than the due date shown on the relevant VAT return. HMRC has said that this change does not affect any cheque payments made by Bank Giro.

Any cheque payments that do not clear by the due date could be liable to a surcharge for late payment.

HMRC has reminded businesses that electronic payments, even when not obligatory, give firms up to seven extra calendar days to pay or, if the payment is made by direct debit, at least ten extra calendar days.