Important information about deferral of VAT payments

Over the past few months, there have been various government support schemes to help businesses through this time. This included the option of deferring VAT payments without penalties or late payment interest if businesses were unable to pay on time.

This deferral of payments applied to VAT payments that were due between 20‌‌ March and 30‌‌ June 2020 with the option to defer these until 31‌‌ March 2021.

If you chose to defer you VAT payments during the pandemic your VAT bill still needs to be filed on time.

When did the scheme end?

The scheme ended on 30th June 2020, after this date, all VAT payments should be paid in full and on time.

There is more information about paying your VAT bill on the GOV.UK website

When do I need to pay my deferred VAT Bill?

Originally HMRC stated that the deferred payments must be made in full by 31st March 2021. If you are able to make this payment in full, you can still do, however, a longer-term solution payment system has been devised.

On 24th September 2020, the chancellor announced that businesses will have the option of making smaller payments up to the end of March 2022 without incurring interest.

To take advantage of this relief, you will need to opt-in to the scheme.

How to opt-in to the new VAT Deferral payment scheme

The new payment scheme will be available in early 2021, you will not be able to opt-in until then. This cannot be managed by your agent, you must apply for this yourself by the end of March 2021.

The scheme will allow you to make up to 11 smaller, interest-free monthly payments until the end of March 2022 instead of paying your outstanding VAT in full at the end of March 2021.

You will be able to select a number of payments between 2 and 11 equal monthly instalments and this will allow you to pay your outstanding VAT without interest.

To be eligible for 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 before the end of March 2021
  • be able to pay the deferred VAT by Direct Debit

Opting-in to this scheme will still allow you to use other time to pay arrangements you have set up for HMRC Debts and any other outstanding tax.

Preparing to opt-in to the VAT Deferral payment scheme

If you are planning on using the new payment scheme, there are several things you can do to prepare yourself.

This includes creating a Government Gateway account if you don't already have one.

You will also need to make sure your VAT returns are up to date and have been submitted for the past 4 years. If this isn't up to date, you will not be able to opt-in to the scheme.

You will also need to correct any errors on your VAT Return as soon as possible. If any corrections are made after 31st December 2020, these may not show up on your Deferred VAT balance.

And finally, you will need to know how much you owe, including any payments that have been made and the amount that was originally deferred.

What do I do if I need more time to pay my VAT bill?

If you need more time to pay your VAT bill, you must contact HMRC before the payment is due.

If you cannot pay your Tax bill on time, there is more information is available on the GOV.UK website.

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