Faster Payments for VAT, tax and credit cards?

cottager

Does anyone know if Faster Payments are planned for payments to HMRC? That's monthly PAYE, VAT every quarter, and twice-yearly income tax.

VAT and income tax especially can be large sums to go out all at once compared with the usual monthly supplier bills etc, and not always easy for a very small business to manage well. Of course we try to put it to one side as we go along, but that's been getting harder lately. A couple of days reduction in the time taken for a payment to 'travel' might not sound much, but when you're on an overdraft and it's leaving your account 2 days (or up to 4 if there's a weekend) ahead of when it's due, it means more charges.

It was just a fact of life we accepted before FP came in, but now, when almost everyone else we pay gets it 'same day', it's an unhelpful annoyance. Do you think HMRC will ever be operating on FP?

And credit card companies, what about them? I realise it was never going to be instant for every payment to every bank or type of account from the off, and would be phased in over time, but payments to one (Barclaycard) now go by FP as of a couple of months ago, while another (MBNA) still takes 3 days with BACS. Why would that be? Just taking longer to get their act together, or could they actually opt not to participate?

JasonLVC

I cannot comment on the other taxes but for VAT, if you submit your VAT return online (instead of filling out a paper one and posting it), HMRC will extend the due date for payment by 7 days.

If you also pay your VAT via BACS, then HMRC will extend that to a further 3 days so if your VAT return is due 31 December 2008 say on paper you'd have to submit the return and cheque BEFORE 31 December 2008.

If you submit your return online on 31 December 2008 and pay via BACS, HMRC will not deduct any money until 10 January 20009 - so a full 10 days extra grace period for free.

You can also elect to pay VAT returns monthly if you want to OR depending upon your turnover, go for the annual accounting scheme where you pay an estimated amount of VAT over to HMRC spread over 10 months and then submit a single VAT return with any balancing payment.

For the future, HMRC are looking to impose monthly online VAT returns but this will initially only be fore large businesses but by around 2015ish they'll be extending it to all businessess regardless of size.

Go speak to your book-keeper/accountant for more advice on this.

Mikeyorks

For the tax element ..... look at the Sort Code on the payslip (reverse?) for direct payments. Then put it into this checker from APACS :

http://www.apacs.org.uk/sortcodechecker/index.html

...... that (as opposed to HMRC policy) determines if it will accept FP. But I suspect the electronic accounts are direct with BofE .... so it may be a while? They're not exactly leading edge when it comes to technology.

But it's not the date your payment hits HMRC that counts. It's the 'effective' date they give it for interest / penalty (both the same) purposes. Look at this table which should help you judge how best you retain your money the maximum period? But don't go for DD ...... despite it's presence in the table it's really only offered for deferred payments via instalment. Quite ridiculous they don't offer it for current liabilities when considering the deadlines / interest / penalties involved. For SA, in particular, it would be ideal for their customers to set up a 'one off' DD at the time their liability is calculated whilst filing online.


http://www.hmrc.gov.uk/manuals/baagmanual/BAAG60030.htm

......

cottager

My thanks to both.

JasonLVC wrote: »

if you submit your VAT return online (instead of filling out a paper one and posting it), HMRC will extend the due date for payment by 7 days.

Thanks, yes we've done that ever since filing online began several years ago (and have paid by BACS for even longer), so have the extra 7 days' grace.

JasonLVC wrote: »

If you also pay your VAT via BACS, then HMRC will extend that to a further 3 days

This I had never heard of, though I wouldn't dispute what you say about an extra 3 days' grace as I don't know. All I can say is that the online acknowledgement message displayed after submitting a return has always been unequivocal -- looking at a printout of one now:
Any tax due must be paid electronically and received by HM Revenue & Customs by 07 [MMYYYY]
The day of the month is always specified as the 7th.

In fact we fell foul of this for the last qtr paid just recently. The return was filed online 2 days ahead of the deadline (filed Wed 5th, deadline Fri 7th) with the payment sent at the same time, but unfortunately I just missed by a whisker the bank's cut-off time for it to go out that day, so it didn't leave the account till Thurs 6th, and wouldn't have reached HMRC till the Mon 10th.

So, hands up: at that moment I knew it would be late; but they'd had the return in good time so I hoped we might be forgiven for the payment being one (working) day late arriving. Foolish thought. We were in breach of the rules, and a letter duly arrived saying we will be fined with surcharge penalties if the next 4 quarters' payments and returns aren't on time. So, not that I was aware of it anyway, but HMRC weren't giving us any more days' grace :sad:

Whether I think this is heavy-handed or not for the sake of a day (particularly in the current climate) is irrelevant -- I do know the rules, so it was a fair cop. But of course with Faster Payments it wouldn't have happened.

I'm just wondering what may change over the coming 12 months or so. According to the Pre-Budget Report, extra time will be allowed for payment of tax and VAT etc for small businesses, or they can be spread out or something. This really would help with the way things have been going lately.

But anyway, back on topic: with any grace or not, the BACS payment still takes as long as it takes -- 3 days -- so regardless of when it falls due the money is still going out ahead of that and incurring charges.

Mikeyorks wrote: »

I suspect the electronic accounts are direct with BofE

Correct. Payments go to a Bank of England account in all cases.

I've just done some more digging, and now found the following. I had looked around a little while ago but didn't come across it then. I think it pretty much answers my own question.

At http://www.hmrc.gov.uk/payinghmrc/vat.htm
Information about the Faster Payment service
HMRC is currently unable to receive or make payments using the Faster Payment service, which is offered by some banks.
For a bank's customer to make a Faster Payment, both banks involved in the transaction need to be members of the Faster Fayment scheme. The Bank of England, which is currently HMRC's banking supplier, made a decision some time ago to withdraw from the provision of retail banking services to its customers (one of which is HMRC) and has not joined the Faster Payments Scheme.
HMRC is in the process of moving its business to a new banking supplier but services will not be available until about mid 2009. By that time HMRC and the bank expect to have developed the necessary changes to their systems to enable Faster Payments to be made, received and processed effectively and efficiently.

So it may only be a matter of months before HMRC can accept Faster Payments -- which is great news.

Mikeyorks: many thanks for the interesting 'effective date' info, and I'll study the page you mention.

Mikeyorks wrote: »

it would be ideal for their customers to set up a 'one off' DD at the time their liability is calculated whilst filing online.

Couldn't agree more. This would be an excellent facility, keeping the whole exercise of filing and payment together, and it would also enable HMRC to verify that payment was instigated within the required timescale.

Mikeyorks

cottager wrote: »

Couldn't agree more. This would be an excellent facility, keeping the whole exercise of filing and payment together, and it would also enable HMRC to verify that payment was instigated within the required timescale.

It would also have the major benefit that it 'proofs' the reference number .. by which HMRC allocate the payment.

Where a payment is provided by a mechanism that involves submitting the payslip (cheque and Giro) .... the reference is provided in HMRC format and captured automatically by industry standard OCR / MICR readers. Gives a fairly foolproof result.

But where the customer provides the reference (CHAPS / BACS / Internet banking et al) .... there will inevitably be a significant error rate and which will result in a lot of tracing work for HMRC staff. Part of this is due to the fact that HMRC have different references for all their duties (legacy taxes / SA / CT / PAYE etc) .... and most of them are complex and check digit protected and with mixed numeric / alpha. So it's an error prone environment. Perversely SA is the easiest if you use the UTR ..... but SA actually has 3 different references (UTR / Empref / NINO). Any of these can be provided to the customer depending upon which part of HMRC the communication comes from ..... but only the UTR automatically pins the payment to the record.

Making DD available directly from an online service would enable them to cut across the right reference to the DD record and foolproof the whole thing. Unfortunately such decisions are taken (I'm sure they're not unique!) within HMRC at a level where operational practicalities count for little.

ShelfStacker_3

HSBC credit cards joined the FPS scheme on the 27th, and it's being rolled out gradually.

Extant

Anybody know who the new banking supplier for HMRC is?