VAT DEFERRAL PAYMENT SCHEME

At the beginning of the pandemic, HMRC provided the opportunity to defer VAT that fell due for payment between 20 March 2020 and 30 June 2020.  No interest or penalties have been charged on that outstanding VAT debt and businesses have been free to pay the amount due at any time

The deferred VAT was originally due to be paid before 31 March 2021, but HMRC have now released details of arrangements for further deferring settlement of that debt.  Businesses wishing to do so must formally opt into a new payment scheme and can pay the outstanding amounts in equal monthly instalments by direct debit over a period of up to 11 months.

To smooth the procedure of agreeing a payment arrangement, HMRC is introducing an automated process accessed through an online portal. This will open on 23 February and remain open until 21 June 2021. 

To avoid penalties a business must either:

  • Pay all deferred VAT before the end of March 2021, or
  • Opt into the new scheme by the deadlines, or
  • Contact HMRC on 0800 024 1222 by 30 June 2021 to agree some other arrangement.

To pay in 11 instalments, businesses must opt in by 19 March 2021 and the first payment will be due when opting in.  To pay in fewer monthly instalments, businesses must opt in by the following dates:
           

    Date                                         Maximum number of instalments available

  • 21 April 2021                                                         10
  • 19 May 2021                                                            9
  • 21 June 2021                                                            8

If no opt in is made by 21 June 2021 and the deferred VAT was not paid by the end March then interest and penalties will be charged.

Before a business can use this new VAT deferral scheme it needs to get all its VAT ducks in a row as follows: 

  • submit all its outstanding VAT returns for the last four years
  • correct any errors on past VAT returns
  • know how much VAT was deferred 
  • know how much of that deferred VAT debt is still outstanding 
  • have enough cash ready to pay the first instalment of the VAT due immediately.

You must have the authority to set up a direct debit to pay the remainder of the debt by monthly payments. Where a direct debit can’t be set up, perhaps because there is no UK bank account, or the account has two signatories, you will need to call HMRC on 0800 024 1222.  

If the business doesn’t have the cash to even pay the first instalment of VAT, you should contact the HMRC payment support service on 0300 200 3835.

Banks Sheridan are not permitted to opt in to the payment scheme on behalf of our clients as this must be done by the individual authorised to set up direct debits.  The scheme will be accessed through the online portal using the Government Gateway account.

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

If we can assist further, please do not hesitate to contact us.