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HMRC internal manual

VAT Annual Accounting Scheme

HM Revenue & Customs
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Removal from the scheme: Defaulting on interim payments

Defaulting on an interim payment will not result in the issue of a default surcharge. Instead if a business fails to meet the requirements of the scheme, it will be removed from the Annual Accounting Scheme.

Businesses will be removed from the scheme under the following circumstances:

  • Payment failures;
  • Debt created by non-payment of the interim amounts is greater than 20% of the expected annual liability (unaffected by other debts);
  • If they have received four reminder letters in relation to the last 6 interim payments - that is, over the last two accounting periods, they will be removed from the scheme at the year end; or
  • If they fail to submit two consecutive annual VAT returns and balancing payment.

If a business makes a late payment but you are satisfied that it has a reasonable excuse for doing so, then the business should be allowed to remain on the scheme.