VAT: Filing and payment deadline warningby
You don’t always get one month plus seven days to submit returns and pay your VAT due, as a recent tax tribunal case demonstrated to the taxpayer’s cost.
Large payers – one month only
Tax challenges can be like buses: you get nothing on a particular subject for years, possibly decades, and then two incidents crop up in quick succession.
That happened to me recently and I hold my hand up and admit that I didn’t realise that large businesses subject to the payments on account (POA) VAT regime don’t get an extra seven days after the end of the month following their VAT period to file their returns and settle their tax bill.
The deadline date for the submission of my September 2021 VAT return is 7 November 2021 i.e., one month plus seven days after the end of the quarter. I must also fully pay the tax owed by that date, unless I pay by direct debit, which gives me an extra three working days to pay.
Large VAT payers
If my annual VAT payments exceed £2.3m at any time, I would become part of the large payers VAT system, known as the POA regime, with the following outcomes:
- I would have to make payments on account during my quarter at the end of months 2 and 3, which are calculated according to my previous year’s liability.
- My VAT return must then be submitted and VAT must be fully paid by the end of the following month.
- VAT payments on account and balancing payments cannot be paid using the VAT online direct debit service.
- To avoid a default surcharge for a period, large payers must submit all three VAT payments on time, as well as their actual return.
One Motion case
I had a discussion recently with an accountant about MTD for a business within the VAT POA regime and we discussed the filing deadlines. This was also the key issue in the FTT case: One Motion Logistics Ltd (TC8206), which I read a few days later.
The company incurred big default surcharges after it joined the POA scheme on 1 December 2017, i.e., for its period ending 28 February 2018. It also came a cropper for the May 2018 return before it twigged about the seven-day rule. The director referred to the late payments as an “honest mistake” and argued that the company had a ‘reasonable excuse’ because it was unaware of the seven-day extension being removed for large payers.
The judge was unsympathetic and dismissed the appeal – there was no reasonable excuse for the defaults.
HMRC had issued a clear letter to the company in November 2017, explaining the conditions of the POA scheme, including the seven-day extension rule. The director admitted that he had “not paid close attention to it” and had passed it to his accountants. This was another red herring because reliance on a third party is not a reasonable excuse to avoid a surcharge.
I wonder if HMRC’s letter about the POA regime prominently highlights the amended filing deadlines - perhaps in bold text, a big box or even different coloured lettering? I suspect not, which is a shame because it might have caught the attention of the director and avoided this appeal.
Annual accounting scheme
Here’s a question for the VAT quiz at your office Christmas party: What is the other situation when the one-month plus seven-day deadline does not apply?
The answer is for returns submitted by users of the annual accounting scheme (VAT Notice 732, para 1.4). They make monthly payments on account during the accounting year, and then get two months to file the annual return and pay the balance of tax owed.
Forewarned is forearmed
Very few of your clients will be members of the POA regime - £2.3m is a lot of tax to pay – but this article has hopefully alerted you to the filing and payment deadlines if it becomes relevant in the future.