COVID-19: VAT payment deferral

22nd Jan 21

To support businesses during the COVID-19 crisis, the Government announced on 20 March that VAT payments would be deferred for a three month period.

This deferral:

  • was available to all UK VAT registered businesses (including non-established taxable persons);
  • applied to payments due between 20 March 2020 and 30 June 2020 (except for VAT MOSS payments); and
  • was automatic, with no application or notification of HMRC required.

Businesses were not required to make VAT payments during the deferral period, and were instead initially given until 31 March 2021 to pay any liabilities which accumulated.

However, it was further announced on 24 September in the Chancellor’s Winter Economy Plan that, rather than paying in full at the end of March 2021, businesses will be now able to choose to make 11 equal instalments over 2021-22.

If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:

  • pay the deferred VAT in full on or before 31 March 2021
  • opt in to the VAT deferral new payment scheme when it launches in 2021
  • contact HMRC if you need more help to pay.

If you want to opt in to the new payment scheme

You cannot opt in yet. The online opt in process will be available in early 2021. You must opt in yourself, your agent cannot do this for you.

Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.

The scheme will allow you to:

  • pay your deferred VAT in instalments without adding interest
  • select the number of instalments from 2 to 11 equal monthly payments

To use this scheme you must:

  • still have deferred VAT to pay
  • be up to date with your VAT returns
  • opt in before the end of March 2021
  • pay the first instalment when you opt in

If you opt in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

To prepare to opt into the new scheme, you must have:

  • created your own Government Gateway account if you do not already have one.
  • submitted any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
  • corrected errors on your VAT returns as soon as possible
  • made sure you know how much you owe, including the amount you originally deferred and how much you may have already paid

You also need to:

  • pay what you can as soon as possible to allow us to show the correct deferred VAT balance
  • consider the number of equal instalments you’ll need, from 2 to 11 months

For full information, go to this link or contact us – we’re happy to help clarify matters for you.