In the UK, it is now mandatory to pay VAT online; if you send in an old paper return, you’ll be hit with a penalty and end up having to pay even more money to HMRC. However, in certain circumstances you may be exempt from paying VAT online, and can still send paper returns. You’ll need to be sure that you are exempt, however, and that HMRC knows how you’re planning to send in VAT returns.
The vast majority of businesses pay their VAT online; here are some tips to help you do it right.
Putting in the incorrect reference number is a small, easy mistake to make, but one that could cause you a big headache. Your VAT reference number will be in your online account or your VAT registration documents. Check and double check that you’ve entered the reference correctly so you know your payment will appear on your account.
The easiest way to ensure your VAT returns are always paid and on time is to use your HMRC online account to set up direct debit payments. This means HMRC will collect any VAT from your account three days after the return was due; all you have to do is make sure you have money in your business account and are aware of the amount that will be taken.
If you have an Annual Accounting Scheme, you cannot use the online direct debit function for paying VAT, but you are able to make a balancing payment should you owe extra VAT.