As a small (or large) business owner, you have certain unavoidable responsibilities with regards to government regulation and tax. It can be a pain to deal with all of the administrative details, but you should also see it as a consequence of making your business succeed. One of the most important things you need to do is submit your VAT return as well as pay any outstanding VAT. Below, we take a look at all the details for registering for VAT, what you need to do to pay your bill and what are the consequences for not meeting a deadline.
Step 1: VAT-registered and ready to do business
If you’re running / owning a business or are a sole proprietor (self-employed), you will have a set of responsibilities relating to VAT. To ensure you stay compliant, you must: Pay the VAT on any purchases you make from other firms; if you sell goods or services to other firms or customers, you must collect VAT from them; ensure you file your VAT return every three months; and, finally pay any owed VAT to the tax authorities.
All businesses who meet a certain annual turnover threshold (£85,000), must be VAT registered. However, that doesn’t mean you’re actually ready to submit a return or pay VAT online. You will first need to apply on the UK government website for a Government Gateway ID. You will need to supply the following information as part of the application:
- Your registered VAT number
- Your businesses address in the form of a post code
- The initial date you became VAT-registered
- The date (month) of your last VAT return
- The number in section 5 of your last VAT return
You will fill in the above, as well as a few further personal and business details. Next, you will receive your User ID as well as an activation code to your registered contact information. Enter the code and you will become an activated Government Gateway user.
When is the VAT bill due?
Most firms must submit a VAT Return on a quarterly basis. You will need to do this within one month and seven days from the final day of the period that the return covers. For most instances, you will also need to submit the payment for any owed VAT at the same time.
Step 2: Time to pay the VAT piper
Once you’ve registered and are sure about when your returns are due, you can go ahead and settle the bill. Recognising the variety of banking and payment channels that are available to business, HMRC allows you to pay off your tax obligation in a variety of ways.
Failure to pay by the due date will result in a fine from HMRC. If the due date comes on a weekend or bank holiday, your payment must be received on the last working day before this.
For payments on the same or next day, you can use:
- Telephone banking
- CHAPS
- An online bank account
For three-day payments, you can use:
- Direct Debit
- Bacs
- A standing order
- A debit or corporate credit cards
- Or your bank / building society
Your bank account is often the simplest way to pay VAT online, and we recommend it. You will need to log in to the government website and then select “pay by bank account” when viewing your VAT bill.
Consequences of not paying your VAT bill
You will get a default on your record if HRMC does not receive your VAT return or the full VAT payment by the due date. There should be no further consequences so as long as you settled your VAT bill as soon as possible and do not record another default for the next 12 months. If you do miss another deadline, you will likely have to pay a fine or surcharge. This is calculated by looking at the amount of VAT that is not yet paid as well as the size of your annual turnover.
