When must your VAT payment reach HMRC? The correct answer is: seven days after the end of the month following the end of your VAT quarter. Not seven working days, seven calendar days.
If you get this wrong and pay your VAT late, you will receive one or two warnings from HMRC (two where the penalty would be under £400). If you pay late again within 12 months you will be charged a penalty of 2% of the late paid VAT. This percentage penalty increases every time you pay late, from 5% to 10% to 15% of the VAT due. Even paying one day late, counts as late for calculating those penalties.
Make sure you know exactly how long it will take your electronic payment to reach HMRC’s bank account. Using the faster payment service (FPS) normally means the payment arrives within two hours, but there are monetary limits for FPS which vary between banks and for different types of bank accounts (corporate or retail). If the payment is too large to be sent by FPS, the bank will generally send it by BACS – which takes three working days.
If you have a direct debit setup to pay your VAT, HMRC will deduct the correct amount from your bank account three days after the due date for that VAT return, or three days after you submit your VAT return if that is later. So if you are late with filing your VAT return, the direct debit will be collected late, and you will have made a late payment of VAT, leading to a potential penalty.