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HMRC internal manual

VAT Time of supply

HM Revenue & Customs
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Actual tax points: payments: cheques

Receipt of a cheque does not in itself amount to receipt of a payment for VAT purposes. Under banking law payment can only be said to have occurred when the cheque has been presented and met by the drawer’s bank. In other words once the ‘cleared effects’ have been credited to the payee’s bank account. In some cases, however,it is banking practice for a cheque to be credited to the payee’s bank account on the date it is paid in. But this does not necessarily mean that the cheque was fully cleared at that time. It normally takes five working days for a cheque to complete the clearance cycle. Therefore, unless there is evidence that a cheque was the subject of special clearance procedures, it should be assumed that payment for VAT purposes will not normally have occurred until the fifth working day following presentation.

Despite this, it is normal practice for many businesses to use the date a cheque is received as the date of payment for accounting purposes. Where this is the normal practice, and provided the cheque is subsequently presented and cleared without undue delay, this date may also be regarded as the payment date for VAT time of supply purposes. In the event of the cheque not being honoured no payment will have occurred and any VAT accounted for on this basis may be adjusted accordingly. If presentation of a cheque is delayed for any reason the date of clearance is to be regarded as the date of payment.