Guide
Can you pay VAT in instalments?
Businesses are normally expected to pay VAT by the HMRC payment deadline.
If paying the full amount at once is difficult, there are generally two different routes worth understanding.
Option 1: HMRC Time to Pay
HMRC may agree a Time to Pay arrangement for businesses experiencing difficulty paying their tax liability. This is an agreement directly between the taxpayer and HMRC.
Eligibility and repayment terms are determined by HMRC based on the circumstances. Businesses should contact HMRC as early as possible if they believe they will have difficulty paying.
Option 2: VAT finance
An alternative may be external business finance. The VAT liability can be funded by a lender and the business then repays the lender over the agreed term.
Finance costs apply and approval is not guaranteed.
Which option should I choose?
The answer depends on the circumstances of the business. Factors worth considering include:
- The reason for the cash-flow gap
- How quickly the business expects cash flow to improve
- The cost of external finance
- The repayment period
- Existing borrowing
- Whether HMRC is prepared to agree a Time to Pay arrangement