Extension for direct debit facility did not change payment date

The taxpayer submitted its January 2022 return on time – by 7 March 2022 - showing a net liability of £96 802 but it could not pay the amount owed by the due date. The directors contacted HMRC to propose a time to pay agreement on 10 March 2022 which was three days after the due payment date. The late proposal meant that the company was subject to a 2% default surcharge because it was deemed to be a late payment. The taxpayer had defaulted previously for its January 2021 period so was already within the surcharge regime. The director said that because the company paid its VAT by direct debit – giving an extra three working days to settle its dues – the relevant date for late payment was 10 March not 7 March as claimed by HMRC.

The legislation in VAT Regulations 1995...