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You have a legal obligation to submit your VAT Returns and pay any VAT you owe to HM Revenue & Customs (HMRC) by the due date. If you don't submit a return HMRC can issue an assessment.
The assessment shows the amount of VAT that HMRC believes you owe, based on their best estimate.
This guide explains what to do if HMRC sends you an assessment because you have not sent in your return by the due date. You must respond to the assessment within 30 days.
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HMRC may issue an assessment in the following situations:
This list is not exhaustive - there are other situations when HMRC may make an assessment. When HMRC notifies you of an assessment they'll explain why they've made the assessment.
It's your responsibility to make sure you submit your return and make any payment that's due by the date shown. If you don't submit your return, HMRC will send you an assessment of the amount of VAT they think you owe. You may also be liable to a default surcharge and a mis-declaration penalty.
Read about penalties and surcharges for mistakes and delays with your VAT
If HMRC finds you've incorrectly declared the amount of VAT you owe, you may also have to pay interest. This is initially calculated from the date you should have paid the VAT up to the date shown on the assessment.
Read more about when you might have to pay default interest
If you haven't submitted your VAT Return, HMRC will notify you of the assessment and include a pay slip and details of how to pay.
You should respond to an assessment by submitting your return and making any payment due. If you don't do this, then you must pay the assessment. In either case, you must respond within 30 days of the date the assessment was issued.
If the amount on the assessment is lower than the amount of VAT you owe, you should tell HMRC within 30 days by submitting your overdue return and paying the VAT due. If you know the assessment is too low but you aren't able to submit a return, you should contact HMRC immediately and tell them about the higher figure. HMRC will then increase the assessment and any surcharge. If you don't tell HMRC within 30 days you may be charged a mis-declaration penalty or be liable for prosecution.
Read about the penalties for mistakes and delays with your VAT
If you think the assessment is too high, you can't appeal against it. Instead, you should submit your overdue return showing the correct amount of VAT you owe, and make any payment that's due.
If you know the assessment is too high but you aren't able to submit a return, you should notify HMRC immediately.
You must pay the amount of the assessment even if you've claimed a repayment - or you intend to. You can't offset a possible repayment against what you owe on an assessment.
If you pay an assessment and don't send in your return, HMRC will investigate the circumstances during their next visit. They'll ask you for a completed return for the period that was assessed. If they find that you've underpaid, you may have to pay a penalty and interest, or if they find that you've paid an assessment that you know is too low, you may be liable for prosecution or to pay a penalty for deliberately understating the VAT due.
Find out about interest on late or undeclared VAT payments
If you're not able to pay an assessment it's very important to contact HMRC as soon as possible to explain your situation. You should still submit your overdue return.
Find out what to do if you can't pay the VAT you owe
You shouldn't just keep paying assessments instead of sending in your returns. If you do, HMRC will automatically increase the amount of each assessment.
If you're able to complete your overdue return, there are two ways you can submit it to HMRC:
You should also pay the VAT you owe when you submit your overdue return. If you're not able to pay the VAT it's very important to contact HMRC as soon as possible to explain your situation. You should still submit your return.
Find out what to do if you can't pay the VAT you owe
Sometimes it's possible that you might not be able to fill in your return, for example because of a staff or computer problem. If so you should tell HMRC, but you'll still have to pay the amount shown on the assessment.
You have a legal obligation to correctly work out the VAT you owe and to send HMRC a return - and any payment - by the date it is due. If you can't pay the VAT you owe it is important that you still send in a return by the due date and contact HMRC immediately about your payment problem. If you don't send in the return you may be liable to penalties.
It may be that you can't fill in your return because of exceptional circumstances, for example the death or illness of a critical staff member or a severe computer problem. Contact HMRC as soon as possible to explain your situation. You may be able to avoid a penalty.
Read about the penalties and surcharges for missed VAT deadlines
Find out what to do if you can't pay the VAT you owe
If you have problems making your VAT payments it might be worth considering the Cash Accounting Scheme. Under this scheme you only pay the VAT you've actually received rather than invoiced for. This scheme can be particularly helpful if you have to wait a long time between sending out sales invoices and getting paid by your customers.
However, you should bear in mind that you can't reclaim any VAT you've been charged until you've actually paid it and you've received a valid tax invoice.
Check if you're eligible for the Cash Accounting Scheme
If you have problems working out from your sales and purchases invoices how much VAT you owe, it might be worth considering the Flat Rate Scheme. Under this scheme you work out your VAT payments as a percentage of your total, VAT-inclusive turnover - so you don't have to record the exact amount of VAT on every sales and purchase invoice in your accounts.
