Banned from nearly all shops, life is now being made difficult for the humble cheque by HMRC.

To deter traders from settling their VAT liabilities using cheques, from 1 April 2010, all cheques posted to HMRC will be treated as received on the date the cheque clears, not when they have arrived in the post. Small businesses posting a cheque to HMRC will need to allow time for delivery, and for the cheque to clear, in order to avoid the risk of a late payment penalty.

This means that companies will have to rely on the fact that the HMRC will cash a cheque promptly. With this new move, online payment options look much more attractive, especially as most businesses have an extra seven days after the payment due date to pay their VAT electronically.

For larger organisations, with a turnover of £100,000 or more (excluding VAT), from April 1, all future VAT returns must be filed and paid online (including nil and repayment returns), with no option to pay by cheque.

This requirement also applies to any business that registers for VAT on, or after, 1 April, regardless of its size. If you register for VAT before this date and your turnover stays below £100,00, you will still be able to pay by cheque.

While the more old fashioned may be sad to see the cheque’s decline, there are real benefits to using HMRC’s online system, including:

· Speed – if you’re not already registered to use HMRC Online Services, going through the online registration and enrolment process takes just a few minutes. You’ll be able to submit your return as soon as you’ve registered.
· Security – all transactions are 100 per cent secure, since they’re encrypted to the highest commercial standards. You get a unique User ID and create a password to keep your details safe. This allows only you – or someone you authorise – to have access to that information.
· Convenience – the service is available day and night, whenever is best for you.
· Accuracy – there are automatic checks to help reduce errors; meaning there’s less chance of having your return sent back to you to be corrected or for clarification.
· Reliability – you don’t have to worry about your return being lost or delayed in the post as you’ll get an on-screen acknowledgment – including a unique submission receipt reference number – when you submit your return.

For more information, visit the HMRC website, www.hmrc.gov.uk, to find out how to use the VAT online services.

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