VAT registered businesses with an annual VAT liability of more than £2.3 million are required to make payments on account (POA) to HMRC.
HMRC’s VAT Payments on Account notice (700/60) explains how making payments on account work and has recently been updated.
VAT registered businesses become liable to make POA’s where:
The £2.3 million includes VAT on imports and goods ex-warehouse.
- Quarterly VAT returns are submitted to HMRC
- Total liability exceeds £2.3m a year.
Businesses that are liable to make POA’s are required to pay 1/24th of their estimated annual liability to HMRC in the second and third months of the VAT quarter, with a balancing payment submitted with quarterly VAT return.
The payments on account and the balancing payments must be made electronically, and cleared funds must be in HMRC’s bank account by close of business on the due date.