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HMRC Announces New Rules For Cheque Payers

11/03/2010

By Lea Pachta

To deter traders from settling their VAT liabilities using cheque, HM Revenue & Customs (HMRC) has announced that cheques will need to clear by the normal due date for payment to be deemed on time.

From 1 April 2010, all cheque payments posted to HMRC will be treated as received on the date the cheque clears. "This means if you are posting a cheque to HMRC, you should allow enough time for the post to arrive and for the cheque to clear to avoid the risk of a late payment penalty," said Adrian Houstoun, a VAT partner at top 20 UK accountancy firm Kingston Smith LLP.

"With businesses now relying on HMRC's efficiency to bank their cheques promptly, electronic payment methods are likely to look much more attractive," Adrian said. "Most businesses have an extra seven days after the payment due date to pay their VAT electronically, while those paying by cheque will have to submit it a week before the due date."

From 1 April 2010, businesses with an annual turnover of £100,000 or more (excluding VAT) must file and pay all future VAT returns online (including nil and repayment returns), even if their turnover drops below £100,000.

This requirement also applies to any business that registers for VAT on or after 1 April 2010, regardless of its size. If you register for VAT before April 2010, you won't have to submit your return and pay online if your turnover stays below £100,000.

Adrian said: "Most of the traders paying by cheque after 1 April 2010 will be small in size and number, which means this new measure is likely to go unchallenged and HMRC will get its wish, i.e. payment by cheque will become a rarity."

For more information, visit the website to find out how to use the VAT online services.

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