Businesses that deferred VAT bills last year and with payments to make can join a new deferral payment scheme.
HMRC says companies that deferred VAT payments from 20 March to 30 June 2020 can opt in for the new deferral scheme from next week (23 February 2021).
The scheme is one of three payment options being offered, which includes:
- Paying in full on or before 31 March 2021
- Joining the new payment scheme (online service is open from 23 February to 21 June 2021)
- Contacting HMRC to agree extra help to pay the bill by 30 June 2021
Interest or penalties may be charged if the VAT payment you deferred is not paid in full by 31 March 2021 and you have not taken advantage of the deferral scheme or payment assistance.
We would recommend that if you can pay your outstanding VAT bill by 31 March 2021 you should do so. But if you are planning on joining the deferral payment scheme, we recommend doing so once the service opens. Or, if you are contacting HMRC to agree extra help, don’t delay.
Joining the VAT deferral payment scheme
The new VAT deferral payment scheme opens from 21 February up to and including 21 June 2021. If you are on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme you will be invited to join the new scheme later in March.
The scheme lets you pay your deferred VAT in equal instalments that are interest free. You choose the number of instalments depending on when you join: from two to 11.
To use the online service businesses and sole traders who are registered for VAT must:
- join the scheme yourself, your accountant cannot do this;
- have deferred VAT to pay;
- be up to date with VAT returns;
- join by 21 June 2021.
If you join the payment scheme you can still use the Time to Pay arrangement for other HMRC debts and outstanding tax.
Depending on when you join the scheme determines the maximum number of instalments that are available. Joining the scheme in March means you can take advantage of deferring VAT payments in 11 instalments. Please note, the later you join the fewer instalments you can make. This example shows how many instalments are available depending on when you opt in to the scheme.
Join by Number of instalments
19 March 2021 11
21 April 2021 10
19 May 2021 9
21 June 2021 8
You must create your own Government Gateway account before joining the scheme. Ensure any outstanding VAT returns have been submitted from the last four years or you will not be able to join the scheme. Correct errors on your VAT returns as soon as possible and make sure you know how much you owe and the amount you originally deferred. Also, you need to know how much you have already paid.
More information is available from HMRC.
For help with VAT or any tax matters, you can contact us for details.