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 should still have been filed on time.
The scheme ended on 30th June 2020, after this date, all VAT payments should be paid in full and on time.
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 can make this payment in full, you should 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 VAT Deferral Payment Scheme will open on 23rd February 2021 and it will be running until (and including) 21st June 2021.
You will be invited to join this payment scheme if you are on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme.
This new scheme will allow you to make up to 11 smaller, interest-free monthly payments 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:
- join the scheme yourself, and agent cannot do this for you
- still have deferred VAT to pay
- be up to date with your VAT returns
- join by 21st June 2021
- pay the first instalment when you join
- pay your instalments by Direct Debit
If want to use the scheme but cannot pay by Direct Debit, you can contact the COVID-19 helpline when the scheme opens.
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.
Instalment options available
The number of instalments available to you will change depending on the month you opt into the scheme. There are a maximum of 11 instalments available from March, however, if you join in April this goes down to 10, from May its 9 instalments and if you join the scheme in June it's 8 instalments.
What should you do to prepare?
To join the scheme you will need to do the following:
- create your own Government Gateway account (if you do not already have one)
- submit any outstanding VAT returns from the last 4 years – if you don't you will not be able to join the scheme
- correct errors on your VAT return as soon as possible
- make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
If you cannot use the online service
You won't be able to use the online service if you don't have a UK bank account, if you can't pay by direct debit or if you have dual signatories on your account.
If any of these apply to you and you want to join the new payment scheme, make sure you contact the COVID-19 helpline when the scheme opens. You can call on 0800 024 1222 and an adviser will help you to join the scheme.
Do you need to correct VAT returns for the VAT deferral period?
The VAT deferral period covered accounting periods for February, March, April & May 2020. However, May was for payment on account customers and certain non-standard tax periods only, in addition to the previous months.
If you have noticed an error on a VAT return which relates to a period covered by the scheme, you should Fill in form VAT652 and send it to the VAT Error Correction Team.
What can I do if I still can't pay?
If you still can't pay and you need more time, contact HMRC.
If you would like to know more about the support that is available check out this business support guide from HMRC.