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Will your VAT payment be fast enough?

Posted: December 14, 2017

Faster payment of VAT

When a business fails to submit and pay its VAT return on time it may attract a default surcharge, a percentage penalty that is based on the amount of VAT that is paid late.

Where there is a ‘reasonable excuse’ for the delayed payment then HMRC may reconsider and withdraw the surcharge. If the business is unsuccessful at that stage but still feels strongly enough about their case, they may take the appeal to a formal Tribunal and allow an independent process to review and decide the matter.


There have been several instances lately where businesses have received default surcharge penalties resulting from late VAT payments where the business has relied on their bank’s faster payment service (FPS) to pay the VAT. The problems seem to have arisen where the amount of VAT being requested for payment under FPS exceeds the bank value limit, and the business was unaware of this limit.


HMRC take the view that the business should be aware of these limits, and that any failure because of exceeding the value would not be a ‘reasonable excuse’ in their eyes. They may take an alternative view where the bank has made an error or failed to perform as expected in processing a payment, but won’t accept ignorance of the value limit. This has been supported in several tribunal cases.

If you are a frequent user of FPS for your business payments, then you may already be aware of the monetary limit applied by the bank. If you don’t know this limit then it might be a good time to check and make sure that it is adequate for all your business payments, including VAT, in order to avoid any potential default penalties in the future.