VAT Deferral New Payment Scheme

HMRC have issued guidance about a new payment scheme option for businesses that deferred VAT between 20 March and 30 June 2020 and still have payments to make. The options for payment are:

• paying the deferred VAT in full on or before 31 March 2021
• opting in to the VAT deferral new payment scheme when it launches in early 2021
• contacting HMRC if you need more help to pay

Opting in to the VAT deferral new payment scheme

If you opt into the VAT deferral new payment scheme, instead of paying the full deferred VAT amount by the end of March 2021, your business can make between 2 and 11 smaller equal monthly payments, interest free.

All instalments must be paid by the end of March 2022. You will need to opt in to the scheme. If you do this your deferred VAT liabilities will not need to be paid by the end of March 2021.

If you want to opt into the new payment scheme you must do this yourself. The online opt in process is expected to be available early 2021.

To use this new scheme, you must:

• still have deferred VAT to pay
• be up to date with your VAT returns
• be able to pay the deferred VAT by Direct Debit

The full guidance, which includes what you can do to be ready to opt in, can be accessed via the following link: –

https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19

The actions you can take now to be ready to opt in to the VAT deferral new payment scheme include:

• creating your own Government Gateway account, if you don’t already have one
• submitting any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done this.
• correcting errors on your VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in your deferred VAT balance.
• making sure you know how much you owe, including the amount you originally deferred and how much you may have already paid and consider the number of equal instalments you will need, from 2 to 11 months.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.