Recovering When You Can't Pay VAT

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Can’t afford to pay VAT? Here’s how to avoid making a late payment

Value Added Tax (VAT) is a consumption tax levied on goods and services in the UK. Business owners are required to collect this tax from customers when they sell a product or service, and to pay this to HM Revenue and Customs (HMRC) before a specified deadline. 

If you do fail to meet a VAT payment deadline, you’ll be subject to paying interest on top of the VAT bill. If you miss multiple deadlines, this penalty will only increase further and you may need to take out VAT Finance to cover the costs. We've put together some tips below, on how to stay on track with your taxes and avoid those late payments.

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Know What You Owe

In order to budget effectively for your VAT payments, you’ll need to know what you owe – and to stay on top of any changes to tax rates too. Liberis Finance Director, Tom Bason, says: 

“In terms of planning ahead, definitely make sure to stay on top of any changes to tax, and the correct tax legislation that applies to you and your business. Make sure you’re on the right VAT scheme and whether that be a flat rate VAT scheme too. The HRMC site is best for keeping up to date with this, and speaking with your accountant on a regular basis.”

Usually, the amount of VAT you owe HRMC will be the difference between your sales and purchase invoices. However, depending on your business, you may be on the Flat Rate Scheme, or the Cash Accounting Scheme, in which case you’ll need to calculate what you owe slightly differently. 

Keep An Eye On Your Deadlines

To ensure you don’t fall late on your VAT payments it’s crucial that you stay on top of your deadlines. So mark them in your company calendar, set reminders, and do everything you can to make sure the date doesn’t slip by without you noticing! 

If you do know you’re not going to make a deadline, be sure to call HMRC before your payment date on 0300 200 3835. You may be able to avoid penalties by doing so, if HRMC can see that you genuinely can’t pay in full, but will be able to in the future. 

As VAT deadlines can be spaced annually, without a tight enough budget it can be easy to lose track of funds and use them to cover other costs here and there instead. To ensure this doesn’t stop you from making your payments in time, always try and make sure you’ve got a little extra financial padding – just in case. You can build this up by looking for smart ways to allocate your budget and find you can make savings. You can read more tips on how to save in our Budgeting For Small Business Guide.  

Seek alternative funding

If you do have a tax deadline coming up that you’re not going to be able to meet, you can seek short term business finance to help you cover the costs, and avoid paying any penalties or interest on top. 

If you’ve been in business for over 4  months and take £5k or more in customer card payments each month, you’ll be eligible for a Business Cash Advance from Liberis Finance. With this alternative form of funding you’ll only pay back when your customers pay you, as payments to Liberis are taken automatically as an agreed upon percentage of your customer card takings. You can Get A Quote online here. 

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Business stories

Here's what some of the small businesses we've funded have to say about Liberis Finance!

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    "Working with Liberis is just lovely, they’re so easy to talk to and the process is so straightforward. Especially the repayment system . . . it’s a big advantage over paying a monthly fee like you would with the bank"

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  • Bahzad Yad
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    “When I’m buying stock, there are often special offers that I can’t afford to miss - especially in the run up to busy holidays like Easter. Having access to finance allows me to buy more stock at better prices.. I have used an overdraft and some facilities with the bank, but with Liberis I can take out more and pay it back as I earn from my card takings gradually. It works a lot better for me!”
     

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  • David Moore
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    "As most small businesses would agree, the sustainability of cashflow can be put under a lot of pressure when dealing with fixed monthly repayments. But by paying as a percentage of my card takings, as I do with Liberis, means that I pay back only as I earn.”

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  • Michelle Mason
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    "Everything about a bank loan is fixed, from the payments to when you pay it off. The terms are too rigid for a small business like this. With a cash advance, there’s no fixed payment amount or term."

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