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Deferment of VAT Update

18th February 2021

Original Announcement

In March 2020, HMRC announced that businesses were able to defer VAT payments (apart from MOSS payments) that were due between 20 March 2020 and 30 June 2020.

This deferment applied automatically, with no formal application to HMRC being required. Businesses were given until 31 March 2021 to pay their VAT due for the period mentioned above.

In the Autumn of 2020 it was announced that rather than settling the payment in full by 31 March 2021, businesses would be given the opportunity to make up to 11 equal instalments over 2021/22.

Payment Options

The various payment options open to businesses are as follows:

  1. Make the full payment of VAT due for the deferral period by 31 March 2021
  2. Join the new VAT deferral scheme which is open between 23 February 2021 and 21 June 2021.
  3. Contact HMRC on 0800 024 1222 to arrange time to pay. This needs to be done by 30 June 2021

If none of the above options are taken, HMRC are likely to charge penalties and interest on the outstanding VAT due for the deferral period (20 March 2020 – 30 June 2020).

How Does the New Deferral Scheme Work

Rather than pay the full amount due by 31 March 2021, the scheme allows you to settle the amount due in smaller instalments, which will be interest free.

These payments may be made over 2 to 11 instalments, with the final instalment having to be settled by no later than 31 March 2022.

The number of instalments available depends on when an applicant joins the scheme. The earlier they join, the more instalments will be available. For instance if an applicant joins before 19 March 2021, 11 instalments are available, whereas if they join by 19 May 2021, 9 instalments are available.

How do I Join the Deferral Scheme

Online sign up for the scheme will be in place between 23 February 2021 and 21 June 2021. Note if your business is on a payment on account or an annual accounting scheme, HMRC will be invite you to participate in March 2021.  The first instalment will be due upon joining the scheme.

A business may only join the scheme if:

  • They are up to date on their current VAT filing obligations
  • They can settle the instalments by way of direct debit.

HMRC have advised that businesses must set this up themselves and an agent is unable to do this on their behalf. Therefore, an online government gateway account will be needed for your business if this is not in place.

If you wish to join the scheme but are unable to do so (e.g. you cannot pay by direct debit) then HMRC recommend you contact them when the scheme opens on 0800 024 1222.

Please let us know if you have any questions concerning the above.

 

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