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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

Check on business activities: repayment traders

  • a repayment trader is defined in V1-28 Registration as a trader whose deductible input tax regularly exceeds output tax;
  • a trader classified as a repayment trader is excluded from the normal payment enforcement processing (DMBM Debt Management and Banking Manual) they therefore, do not receive a central tax assessment when a return is not furnished for a particular accounting period;
  • classified repayment traders are excluded from surcharge processing;
  • on each visit to a trader classified as a repayment trader consider whether the repayment indicator is still appropriate;
  • as a guide, if a trader is in a net tax due position over a period of one year, and in that year has furnished as many payment returns as repayment returns; an amendment to the indicator from repayment to payment would be justified;
  • any necessary amendment should be made using VAT 12M(A) and passing to the appropriate section for VALID input;
  • bear in mind that reclassifying a repayment trader as a payment trader will result in the trader being required to furnish returns and account for tax on a quarterly basis instead of monthly. Where the trader’s application for registration was late, a belated notification penalty may be applicable and the matter should be referred to the Registration Section; and
  • any trader so reclassified should be informed in writing accordingly.

Payment by electronic means is much quicker and a more secure process than the issue of a payable order. Payment by BACS is the Departmental standard and takes three days to credit to a trader’s account.

You should obtain:

  • bank branch name and address;
  • account holder’s name;
  • account number; and
  • branch sort code number