VAT is a major income source for the UK Government, so HMRC takes non-payment of VAT extremely seriously. While most businesses make paying their VAT a priority, unexpected expenses or a downturn in profits can render them incapable of meeting their VAT commitments when they fall due, and leave them wondering, ‘What happens if I can’t pay my VAT bill?’
Our expert HMRC solicitors and barristers specialise in assisting businesses and individuals with all HMRC and border force related issues, and we have a proven track record of securing excellent outcomes for our clients. Here, we discuss a business’s VAT liabilities and answer the question, ‘What happens if I can’t pay my VAT bill?’.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
What is VAT?
VAT, or Value Added Tax, is a consumption tax added to most goods and services within a supply chain. When combined with National Insurance contributions and income tax, VAT makes up the majority of the Government’s income.
How much is VAT?
VAT is charged at three different rates: standard, reduced, and zero. The majority of
goods and services are charged at the standard VAT rate, which is currently 20%.
Do I have to pay VAT?
Any business that reaches a turnover of £90,000 over a 12-month period must register for and pay VAT. Businesses with turnovers of less than £90,00 can register for and pay VAT if they wish, but they are not obliged to do so.
When is my VAT due?
You must usually submit your VAT return and pay the VAT due within one calendar month and seven days following the end of your accounting period. Accounting periods are usually three months, which means you submit VAT returns and pay VAT quarterly.
If you use the Annual Accounting Scheme, you must submit your VAT return within two months following the end of your accounting period. You should make your VAT payments either monthly or quarterly and make a balancing payment when you submit your return.
Am I personally liable to pay my business’s VAT?
Who is responsible for paying your business’s VAT bill depends on how your business operates. For example, if you operate as a sole trader, you are personally responsible for paying VAT. On the other hand, if you are a director of a limited company, you aren’t usually personally liable to pay its VAT bill.
Speak to us if you’re unsure; our specialist HMRC solicitors and barristers will review your business model and advise on who is liable to pay the VAT generated by its trading.
What happens if I can’t pay my VAT bill?
HMRC charges late payment penalties on VAT bills that remain unpaid. The penalty amount depends on how late a payment is.
If you don’t pay your VAT on the due date but clear it within 15 days, HMRC won’t charge you a penalty. If you pay your bill between 16 and 30 days of payment falling due, HMRC will impose a penalty of 2% of the amount you owe on day 15. For payments made 31 or more days after the due date, the penalties charged by HMRC are twofold. Firstly, you will need to pay a penalty of 2% of the VAT that was outstanding on day 15, as well as 2% of the VAT that remains outstanding on day 30. Secondly, from day 31 until you pay off your debt, HMRC will impose a daily penalty of 4% per year on the outstanding amount.
Being unable to pay your VAT is a serious issue, leading to penalty payments that can quickly mount up. These penalties can significantly increase the amount you owe, making it even more difficult to pay off your VAT bill. Accordingly, it’s essential to take expert advice on your position and how best to address the issue as soon as it becomes apparent that you can’t pay your bill. Our HMRC solicitors and barristers will review your circumstances and advise on your options, including the possibility of entering into a Time to Pay arrangement, which we explain in more detail below.
Can I pay my VAT bill back in instalments?
HMRC may agree to you paying your VAT bill in instalments if you can convince its officers that you will be in a position to clear the arrears within a specified period, usually 12 months, whilst also meeting your ongoing tax liabilities as they fall due. Our HMRC solicitors are expert negotiators and frequently secure manageable Time to Pay arrangements on behalf of our clients.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
