Payments on account (POA)

By Tolley

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Payments on account (POA)
  • What is are payments on account?
  • Who needs to make payments on account?
  • Calculating the POA amount
  • Anti-avoidance domestic reverse charge
  • POA due dates and payments
  • Change in turnover
  • Alternatives

This guidance note provides and overview of the payments on account regime.

Notice 700/60 ; De Voil Indirect Tax Service V5.110 (subscription sensitive); EC/2006/112, Article 112 ; VATA 1994, s 28; VAT (Payments on Account) Order SI 1993/2001 (subscription sensitive); SI 1995/2518, regs 44–48
What is are payments on account?

VAT registered businesses that have an annual VAT liability of more than £2.3m are required to make payments on account (POA).

Businesses that are required to make POA make interim payments at the end of months two and three for each VAT return quarter. The interim payment is intended to cover part of the overall VAT liability for the VAT return quarter. The balancing payment for that quarters' VAT liability will be settled when the business submits its VAT return payment.

POA must be made electronically and the cleared funds must be in HMRC's account by close of business on the due date (or on the last working day if that is earlier).

It should be noted that under VATA 1994, s 83 businesses have no right of appeal against being included within the POA regime. However, businesses who come within the scope of the POA scheme can use the alternatives suggested below rather than make POA.

Who needs to make payments on account?

UK VAT registered businesses need to make POA if:

  • they submit quarterly VAT returns
  • in any period of 12 months or less the business' total VAT liability was at least £2.3m

When determining whether the threshold has been exceeded HMRC will include the following amounts:

  • all VAT declared, or that should

More on VAT compliance and bad debt relief: