Andrew Needham looks at the VAT payments on accounts scheme and how to reduce the monthly payments.
The payments on account scheme (PoA) is HMRC’s way of collecting VAT earlier from the very largest businesses. It helps the government’s cashflow at the expense of the business.
If the VAT payable by a business or a VAT group exceeds £2.3m a year, it is required to make monthly payments of its VAT based on HMRC’s estimation of the VAT due. It then prepares the return for each quarter in the usual way, deducts the two payments on account already made, and pays (or reclaims) the balance.
How does a business know if it is liable to PoA?
HMRC monitors businesses' VAT liabilities from the amounts declared on the VAT returns and notifies the business when it is liable for PoA. HMRC will also calculate the monthly payments that are due, by
