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HMRC internal manual

VAT Payments on Account Regime

HM Revenue & Customs
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Electronic payment

Commissioners’ directions

Section 28(2A) of the VAT Act 1994 allows the Commissioners to make directions to businesses about the manner in which payments on account must be made.

All businesses in the POA regime are directed to make payment electronically. However, direct debit is not available to POA businesses.

Failure to pay electronically will result in a breach of the regulations; and under VAT Act 1994, Section 69, the business may be issued with a penalty. Cases that require a regulatory penalty should be reported to VAT Process Owner team (address at VPOA1600).

Can POA businesses pay by direct debit, or qualify for the incentive of extra time for electronic payment?

POA businesses that submit quarterly returns cannot pay by direct debit or qualify for an incentive of extra time to pay. In 1996, POA businesses were required to make payments electronically and any extension to the standard due date for payment by electronic means was withdrawn. At the same time, interim payments required by businesses in the regime were reduced by 50 per cent - from 1/12th of annual VAT liability, to the current level of 1/24th. This maintained the effectiveness of the regime, whilst taking account of concerns which POA businesses had regarding cash-flow.

POA businesses can pay by direct debit and benefit from the electronic payment incentive if they submit and pay their returns monthly.