From 1 April 2010 all cheque payments sent by post to HMRC will be treated as being received on the date when cleared funds reach their bank account – not the date when they receive the cheque.  This means that businesses must allow enough time for their payment to reach HMRC and to clear their bank account no later than the due date shown on their VAT return.

A cheque takes at least three bank working days to clear, however, to allow for possible postal delays beyond HMRC’s control, they advise that businesses should allow at least three working days for a cheque payment to reach them and a further three days for the payment to clear into their bank account.

A business may be liable to a surcharge for late payment if a cheque payment does not clear by the due date shown on their VAT return.

This change does not affect any cheque payments made by Bank Giro, which are treated as electronic.

The reason for the change

The purpose of the change to the cheque clearance rules is to encourage compliance with the requirement to pay electronically by removing the cash flow advantage currently enjoyed by businesses paying by cheque.  This change is also intended to make electronic methods of payment more attractive to those businesses who are not required to file their VAT return online and pay electronically from 1 April.