If your business deferred VAT payments for the February, March or April 2020 VAT returns, HMRC has issued updated guidance in relation to the repayment of these outstanding amounts.
If the business has outstanding VAT to pay, the business can either:
- Pay the deferred VAT in full, on or before 31 March 2021; or
- Join the VAT deferral new payment scheme.
The opt-in process for the VAT deferral new payment scheme will be open from 23 February to 21 June 2021 (inclusive).
If your business is on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, the business will be invited to join the new payment scheme later in March 2021.
The new deferral scheme allows businesses to:
- Pay any applicable deferred VAT in equal instalments, interest free; and
- Choose the number of instalments, from 2 to 11 (depending on when it joins).
To use the online service, the business must:
- Join the scheme itself. Agents cannot sign up on the business’ behalf;
- Still have deferred VAT to pay;
- Be up to date with its VAT returns;
- Join by 21 June 2021;
- Pay the first instalment when it joins;
- Pay its instalments by Direct Debit (if you want to use the scheme but cannot pay by Direct Debit, there’s an alternative entry route).
If your business joins the scheme, it can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.
Installment options available to you
The month the business decides to join the scheme will determine the maximum number of instalments that are available. If you join the scheme in March, you’ll be able to pay your deferred VAT in up to 11 instalments.
The table below sets out the monthly joining deadlines (to allow for Direct Debit processing) and the corresponding number of maximum instalments (including the first payment):
|
If you join by: |
Number of instalments available: |
|
18 March 2021 |
11 |
|
21 April 2021 |
10 |
|
19 May 2021 |
9 |
|
21 June 2021 |
8 |
Before joining, the business must:
- Create its own Government Gateway account (if it does not already have one)
- Submit any outstanding VAT returns from the last 4 years – otherwise the business will not be able to join the scheme
- Correct errors on any VAT returns as soon as possible
- Make sure you know how much the business owes, including the amount you originally deferred and how much you may have already paid (if any).
Interest & Penalties
You may be charged interest or a penalty if you do not:
- Pay the deferred VAT in full by 31 March 2021.
- Opt into the new payment scheme by 21 June 2021.
- Agree extra help to pay with HMRC by 30 June 2021.
If you need support in planning your deferred VAT repayment strategy, please get in touch with a member of the team.