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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Default Surcharge: Calculation and notification of the surcharge: Defaults affected by the Payment on Account Scheme

Defaults are not affected by movements into or out of the Payment On Account (POA) scheme.Section 59B VAT Act 1994 explains the relationship between sections 59 and 59A.

Businesses with an annual VAT liability exceeding £2 million in any 12 month period or less are required to make payments on account of their quarterly liability at the end of the second and third months of each VAT quarter. A balancing payment for the quarter is then made with the VAT return.

The Large Payers Unit (LPU) are responsible for recording, amending and cancelling defaults for POA traders.

The due dates for payments on account are the last working day of the second and third months of every VAT quarterly period regardless of the period end dates.

The following is an example of how this works

A trader is issued with a

  • SLN or SLNE before entering the POA scheme, or
  • SLN or SLNE prior to the introduction of default surcharge on POAs.

The trader will be liable to a surcharge without further warning if a subsequent default arises within the surcharge liability period.