Why is a recent VAT payment not yet showing on the business account?

Payments can take a few working days to clear depending on the method used (e.g., BACS takes three working days). Weekends and bank holidays can also extend processing times. Always check your bank statement first to confirm the payment left your account, then contact HMRC if it still hasn't appeared after the expected clearing time.

Do I need to set up a separate business account for VAT?

No, you do not need a separate bank account specifically for VAT. You can make VAT payments and receive refunds using your existing business bank account. However, many businesses find it helpful to keep a separate pot of money for VAT liabilities to manage cash flow effectively.

Please provide instructions for paying VAT via CHAPS.

To pay VAT via CHAPS, you'll need to instruct your bank. You'll typically need HMRC's bank details (sort code and account number, which can be found on gov.uk) and your 9-digit VAT registration number as the payment reference. Be aware that your bank may charge a fee for CHAPS payments, which guarantee same-day clearance.

Can you confirm the current balance due on the VAT account, or if there is still some credit?

Your current VAT account balance, including any amounts due or credit, can be viewed by logging into your online VAT account on the HMRC website. Your accountant can also access this information on your behalf if they have been authorised.

Can assistance be provided to set up a payment plan for VAT liabilities?

Yes, if you are struggling to pay your VAT bill, you should contact HMRC as soon as possible to discuss a 'Time to Pay' arrangement. They will assess your circumstances and help set up an affordable payment plan. Interest may be charged on overdue amounts.

Paying VAT and claiming refunds: a UK director's guide

How to pay your VAT bill

When your business is VAT registered, you'll need to submit a VAT Return, usually every three months. If your return shows that you owe VAT to HMRC, you must pay it by the deadline.

HMRC offers several ways to pay your VAT bill, and the method you choose can affect how quickly the payment reaches your account.

Direct Debit: This is often the easiest way to pay. You set up a Direct Debit mandate with HMRC, and they automatically collect the payment from your bank account a few days after your VAT Return deadline. This ensures you never miss a payment.
Online or telephone banking (Faster Payments, BACS, CHAPS): You can make payments directly from your business bank account.
Faster Payments: Usually clears on the same day or next day. This is suitable for most payments.
BACS (Bankers' Automated Clearing Services): Takes three working days to clear. Plan ahead if using this method.
CHAPS (Clearing House Automated Payment System): Guarantees same-day payment, but your bank may charge a fee for this service. It's typically used for very large or urgent payments.
Debit or corporate credit card: You can pay online using a debit card or a corporate credit card. HMRC no longer accepts personal credit cards for tax payments. Payments typically clear within three working days.
At your bank or building society: You can pay by cash or cheque at your bank or building society, but you'll need a paying-in slip from HMRC. This method takes three working days to clear.

When making a payment, always use your 9-digit VAT registration number as the payment reference. This ensures HMRC correctly allocates the payment to your VAT account.

Understanding VAT payment deadlines

Your VAT payment deadline is usually one calendar month and seven days after the end of your VAT accounting period. For example, if your VAT period ends on 31 March, your payment is due by 7 May.

If you pay by Direct Debit, HMRC will typically take the payment three working days after this deadline. If the deadline falls on a weekend or bank holiday, you need to make sure your payment reaches HMRC on the last working day before it.

Receiving a VAT refund

If your VAT Return shows that HMRC owes you money (i.e., your reclaimable VAT is more than your sales VAT), you will receive a VAT refund.

HMRC will usually pay refunds directly into your bank account. You should provide your bank details to HMRC when you register for VAT or update them via your online VAT account. Refunds are typically paid within 10 working days of HMRC receiving your VAT Return.

HMRC may sometimes carry out checks before issuing a refund, especially if it's an unusually large amount or your first claim. This is a normal part of their process and can delay the refund.

What if a payment isn't showing?

It can be concerning if a recent VAT payment doesn't appear on your HMRC online account immediately. Here's what to consider:

Processing time: Different payment methods have different clearing times. For example, a BACS payment takes three working days to clear, while a Faster Payment might show up sooner.
Weekends and bank holidays: Payments made near or on these days will take longer to process.
Incorrect reference: If you used the wrong VAT registration number as a reference, HMRC might struggle to allocate the payment.
HMRC system updates: Occasionally, there can be delays in HMRC's systems updating.

If a payment hasn't appeared after the expected clearing time, first check your bank statement to confirm the payment left your account. Then, contact HMRC directly with your payment details (date, amount, reference number, and method) to investigate.

Payment plans for VAT liabilities

If your business is struggling to pay its VAT bill on time, it's crucial to contact HMRC as soon as possible. They may be able to set up a 'Time to Pay' arrangement.

A Time to Pay arrangement allows you to spread your VAT payments over a longer period. HMRC will assess your financial situation and agree on an affordable payment plan. You'll likely need to provide details of your income, expenditure, and why you can't pay on time. Interest may be charged on overdue amounts.

Common mistakes

Missing deadlines: Not submitting your VAT Return or paying your bill on time can lead to penalties and interest.
Incorrect payment reference: Using the wrong reference number can cause delays and misallocation of your payment.
Not updating bank details: If your bank details for refunds are out of date, your refund could be delayed or sent to an old account.
Ignoring communication from HMRC: Always respond promptly to any letters or emails from HMRC regarding your VAT account.

Frequently asked questions

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