What are the VAT deadlines?
VAT registered companies in the UK are required to submit VAT returns and make VAT payments on time. Failure to meet the VAT deadline can result in fines and interest being charged on the outstanding amount.
Vat payment dates & VAT return deadlines
As a general rule, the VAT deadline for both returns and payments is 1 calendar month and 7 days after the end of the relevant accounting period. Importantly, the deadline includes the time needed for the payment to clear and reach HMRC.
As an example, for the accounting period January to March, the VAT payment and VAT return will be due by 7th May. The 7th of the month does mean the seventh working day.
Even where there are no transactions to be reported for that VAT period, a ‘nil VAT return’ must be submitted to HMRC.
VAT periods run for three months. This means VAT-registered companies must submit their VAT returns and make VAT payments to HMRC four times each calendar year.
The quarterly VAT period does not always follow the calendar quarter. Companies can choose their quarterly period when registering online for VAT.
If you are unsure of the VAT deadline for your company, you can check your online VAT account. You can also use your account to sign up to receive reminders of the company’s VAT deadline and for confirmation that any VAT payments you make have been received by HMRC.
Annual VAT returns
Quarterly VAT deadlines do not apply where the company uses the VAT Annual Accounting Scheme.
Under this scheme, annual VAT returns are allowed if taxable turnover is below £1.35 million. Advance VAT payments have to be made towards the VAT bill throughout the year, based on the company’s last return.
After the annual VAT return has been submitted, the company will either have to make a final payment to cover the shortfall from across the year or apply for a refund in respect of the amount overpaid during the 12-month accounting period.
Completing your vat return
The VAT return should relate to the specific three-month VAT period, accounting for:
- VAT deductible that the company has been charged on purchases (‘input tax’)
- VAT payable that the company has been charged on company sales (‘output tax’)
- VAT on credit notes received from company suppliers
- VAT on credit notes issued to customers
- VAT allowable and due on acquisitions
- Any net overclaim of input tax from previous returns
- Any net understatement of output tax on previous returns
- Bad debt relief, where the debt is over six months past the payment due date but less than four years and six months old
Each VAT return should only include transactions that relate to the specific VAT period.
How do you make a payment for VAT?
VAT is paid to HMRC via electronic payment, such as direct debit, BACS, CHAPS, credit card or online and telephone banking.
Direct debit payments can be set up when registering for VAT on the company’s online VAT account.
If you don’t have a direct debit arrangement in place, you will need to ensure the company’s VAT payments reach HMRC within one calendar month and seven days after the end of the relevant account period. This means making the payment with enough time for the transaction to clear. You should also take account of weekends and bank holidays.
When making payment to HMRC, ensure you use the company’s VAT number as the transaction reference.
What happens if I submit my VAT return late?
Failure to meet the VAT return deadline and payment dates can result in the company being fined and interest being charged on unpaid or underpaid VAT liability.
The penalty will depend on how many times the company has previously defaulted within a 12-month period. There should be no surcharge the first time VAT is paid late.
There are no penalties for late filing of the return if the VAT has been paid on time, but a warning notice will be issued the first time a return has not been submitted.
There are events that even HMRC cannot fail to take into account such as death and incapacity, a fire and similar catastrophic events. However, if none of these applies you are likely to be hit with a default surcharge. You will then have to make a judgment as to whether to make an appeal.
If VAT payment is late, the company will be sent a “Surcharge Liability Notice”. Should the company defauly again within a 12-month period, a penalty will be issued at 2% of the VAT due. This penalty will increase to 5%, 10% or 15% if the error is repeated, and an extended “Surcharge Liability Notice” will be issued.
The company will be logged by HMRC as being in default.
The surcharges are a percentage of the unpaid VAT:
|Annual Turnover||Less than £150,000||£150,000 or more|
|Second default within 12 months||None||2%*|
|Third default within 12 months||2%*||5%*|
|Fourth default within 12 months||5%||The higher of 10% or £30|
|Fifth default within 12 months||The higher of 10% or £30||The higher of 15% or £30|
|Sixth or more default within 12 months||The higher of 15% or £30||The higher of 15% or £30|
|* no surcharge if this is less than £400|
The company will not be fined for late filing of the VAT return if the full VAT amount due is paid on time, if there is no VAT to pay or if the company is due a VAT rebate.
How do you correct an error on your VAT return?
Errors in VAT calculations are not uncommon, but they need to be rectified with HMRC. If you fail to disclose a VAT error, the company could face a misdeclaration penalty of 15% of the unpaid VAT. If you notify HMRC voluntarily of the error, the company will not be fined.
If the error (such as an overpayment of VAT) is under £10,000 or, if between £10,000 and £50,000, do not exceed 1% of the company’s quarterly turnover, VAT errors can usually be corrected by adjusting the current return and including the value of the VAT adjustment.
If the net value of the error is between £10,000 and £50,000 and does not exceed 1% of the company’s quarterly turnover, or if the error is greater than £50,000, you would need to submit either a corrective return using form VAT 652 or a Voluntary Disclosure (Error Correction Notice).
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal, tax or financial advice, nor is it a complete or authoritative statement of the law and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert legal or other advice should be sought.