If you cannot pay your VAT bill, act before the deadline. The worst step is to go quiet. HMRC can often agree a plan to spread the cost, and taking action early keeps the extra charges down.
File your return on time
Even if you cannot pay, still file the return by the deadline. A late return brings its own penalty points, on top of any charge for late payment. Filing on time and paying late is better than missing both.
Contact HMRC early
Call HMRC as soon as you know there is a problem. They deal with this often and can be practical. The sooner you talk to them, the more options you have.
[ Infographic: Steps if you cannot pay your VAT ]
Brief: a short path showing file on time, contact HMRC, agree a Time to Pay plan, keep up the payments.
Alt text: Steps to take if you cannot pay your VAT bill, from filing on time to agreeing a payment plan.
Caption: Act early and talk to HMRC before the deadline.
Ask about a Time to Pay arrangement
A Time to Pay arrangement lets you spread the VAT over a set period, often up to 12 months. You agree a monthly amount you can manage. Interest still applies, but it avoids harsher action and gives you room to recover.
To set one up, have your figures ready: what you owe, what you can pay now, and what you can pay each month.
What to avoid
- Do not ignore the bill. Charges and interest grow, and HMRC can take stronger action.
- Do not spend the VAT you collected. That money is owed to HMRC, not working capital.
- Do not take a second Time to Pay plan lightly. These are meant for one off problems, not a regular fix.
Prevent it next time
Set the VAT you collect aside in a separate account, so the money is ready when the return is due. Watching cash flow and keeping a buffer makes a missed VAT payment far less likely.
Frequently asked questions
What should I do if I cannot pay my VAT? File the return on time, then contact HMRC as soon as possible to arrange a payment plan.
What is a Time to Pay arrangement? An agreement with HMRC to spread your VAT bill over a set period, often up to 12 months, with interest.
Will I get a penalty if I pay VAT late? Late payment brings charges and interest that grow over time. Filing late adds a separate penalty point.
Can I set up a VAT payment plan online? In some cases yes, and in others you call HMRC. Have your figures ready either way.
How do I avoid this happening again? Keep the VAT you collect in a separate account so it is ready when the return is due.