Vat
Treasury

Christopher Chope (Christchurch, Conservative)

To ask the Chancellor of the Exchequer if he will bring forward proposals to put on a statutory basis the concession whereby small business may pay value added tax in three instalments monthly instead of quarterly.

David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)

HM Revenue and Customs (HMRC) runs the Business Payment Support Service (BPSS) to help viable businesses in temporary financial difficulties spread their tax payments over a timetable they can afford. The BPSS operates under HMRC's statutory responsibility for the collection and management of VAT and other revenues. Since its launch in November 2008, the BPSS has helped over 200,000 businesses.

HMRC operates two other schemes to help small businesses, whose taxable turnover in the coming year is not expected to exceed £1.35 million, to even out VAT payments:

1. The Annual Accounting scheme allows businesses to spread their VAT payments evenly by paying monthly or quarterly instalments towards their annual VAT bill.

2. The Cash Accounting scheme allows businesses to account for VAT only when they make or receive payment (rather than on the issue of an invoice, under normal accounting rules). This can provide a cash flow benefit, especially where customers pay late.

Both schemes are set out in legislation.