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VAT Deferral Payment Scheme

VAT Deferral Payment Scheme

What is it?

HMRC are supporting all UK VAT registered businesses by deferring certain Valued Added Tax (VAT) payments until 2022.

How does it work?

On 24 September 2020, the Chancellor announced that businesses who had deferred VAT payments that were due during the period from 20 March to 30 June 2020, would have the option to pay in smaller payments over a longer period.

For those opting to use this scheme, this means that you will be making up to 11 smaller interest-free payments up to the end of March 2022, rather than paying your liability in full by 31 March 2021.

The original deferral applied from 20 March 2020 until 30 June 2020, and included all VAT payments due be made between those dates. This was an automatic offer with no applications required.

Businesses were originally given until the end of March 2021 to pay any liabilities that had accumulated during the deferral period.

HMRC have indicated that businesses that have not paid in full or made an arrangement to pay by 30 June 2021, may be charged a 5% penalty or interest.

Who is it for?

All UK VAT Registered businesses (VAT relief).

Deferral covered the following VAT payments:

  • quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
  • payments on account due between 20 March 2020 and 30 June 2020
  • annual accounting advance payments due between 20 March 2020 and 30 June 2020

Please note, the deferral did not include VAT MOSS payments or payments of Import VAT (when bringing goods into the UK that are subject to VAT from outside of the EU).

What should I do next?

Those wishing to pay their deferred VAT in full by 31 March 2021 can still do so and do not need to contact HMRC

Those unable to pay in full by 31 March 2021 can elect to pay in instalments by 31 March 2022 under the ‘VAT deferral new payment scheme’

The VAT deferral new payment scheme is open from 23 February 2021 up to and including 21 June 2021. You can join the scheme on the gov.uk website.

Those wishing to take full advantage of the scheme, and pay in 11 interest-free instalments, will need to sign up by 19 March 2021, thereafter the maximum number of instalments reduces (see below)               

Deadline for joining

 

Maximum number of instalments available to you

19 March 2021

11

21 April 2021

10

19 May 2021

9

21 June 2021

8

Payments will be by direct debit and the first instalment will be payable when you join the scheme

You must opt-in yourself, your agent cannot do this for you. 

Before opting in you must:

  • create your own Government Gateway account if you don’t already have one
  • submit any outstanding VAT returns from the last 4 years

(you will not be able to join the scheme if you have outstanding returns)

  • correct errors on your VAT returns as soon as possible
  • make sure you know how much you owe, including the amount you originally deferred and how much, if anything, you have already paid
  • know how many instalments you wish to make

Those businesses using the VAT Annual Accounting Scheme or VAT Payment on Account Scheme, will be invited to join the scheme later in March 2021

Businesses requiring additional help in paying will need to contact HMRC on 0800 024 1222, by 30 June 2021 to agree extra help to pay terms in order to avoid possible interest and penalties

If you want to join the new payment scheme, but cannot use the online service, for example if you:-

  • do not have a UK bank account
  • cannot pay by Direct Debit
  • have dual signatories on your account

you can contact the COVID-19 helpline when the scheme opens on 0800 024 1222 and an adviser will help you join.

Critchleys Clients: If you have specific questions, please contact your Critchleys Accountant directly.

 


Published 24 March 2020
Last Updated 19 April 2021

19 April 2021
HMRC have indicated that businesses that have not paid in full or made an arrangement to pay by 30 June 2021, may be charged a 5% penalty or interest

23 February 2021
The VAT deferral new payment scheme is open from 23 February 2021 up to and including 21 June 2021. You can join the scheme on the gov.uk website.

10 February 2021
How does it work? On 24 September 2020, the Chancellor announced that businesses who had deferred VAT payments that were due during the period from 20 March to 30 June 2020, would have the option to pay in smaller payments over a longer period.

For those opting to use this scheme, this means that you will be making up to 11 smaller interest-free payments up to the end of March 2022, rather than paying your liability in full by 31 March 2021.

The original deferral applied from 20 March 2020 until 30 June 2020, and included all VAT payments due be made between those dates. This was an automatic offer with no applications required.

Businesses were originally given until the end of March 2021 to pay any liabilities that had accumulated during the deferral period.

What should I do next? Those wishing to pay their deferred VAT in full by 31 March 2021 can still do so and do not need to contact HMRC

Those unable to pay in full by 31 March 2021 can elect to pay in instalments by 31 March 2022 under the ‘VAT deferral new payment scheme’

The scheme itself will only be open from 23 February to 21 June 2021

Those wishing to take full advantage of the scheme, and pay in 11 interest-free instalments, will need to sign up by 19 March 2021, thereafter the maximum number of instalments reduces (see below)               

Deadline for joining

 

Maximum number of instalments available to you

19 March 2021

11

21 April 2021

10

19 May 2021

9

21 June 2021

8

Payments will be by direct debit and the first instalment will be payable when you join the scheme

You must opt-in yourself, your agent cannot do this for you. 

Before opting in you must:

  • create your own Government Gateway account if you don’t already have one
  • submit any outstanding VAT returns from the last 4 years

(you will not be able to join the scheme if you have outstanding returns)

  • correct errors on your VAT returns as soon as possible
  • make sure you know how much you owe, including the amount you originally deferred and how much, if anything, you have already paid
  • know how many instalments you wish to make

Those businesses using the VAT Annual Accounting Scheme or VAT Payment on Account Scheme, will be invited to join the scheme later in March 2021

Businesses requiring additional help in paying will need to contact HMRC on 0800 024 1222, by 30 June 2021 to agree extra help to pay terms in order to avoid possible interest and penalties

If you want to join the new payment scheme, but cannot use the online service, for example if you:-

  • do not have a UK bank account
  • cannot pay by Direct Debit
  • have dual signatories on your account

you can contact the COVID-19 helpline when the scheme opens on 0800 024 1222 and an adviser will help you join.

24 November 2020
You cannot opt in to the new scheme yet. The online opt in process will be available in early 2021. You must opt in yourself, your agent cannot do this for you. Before opting in you must:

  • create your own Government Gateway account if you don’t already have one
  • submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
  • correct errors on your VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in your deferred VAT balance
  • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid

You should also:

  • pay what you can as soon as possible to allow us to show the correct deferred VAT balance
  • consider the number of equal instalments you’ll need, from 2 to 11 months

24 September 2020

On 24 September 2020, the Chancellor announced that businesses who had deferred VAT payments that were due during the period from 20 March to 30 June 2020, will now have the option to pay in smaller payments over a longer period.

For those opting to use this scheme this means that you will be making 11 smaller interest-free payments up to the end of March 2022, rather than paying your liability in full by 31 March 2021.

Those wishing to pay their deferred VAT by 31 March 2021 can still do so

Full details on the opt-in process will be published early next year

17 June 2020
Payments due in July 2020 onwards

Businesses need to take steps to reinstate their direct debit mandates so that they are in place in time for payments due in July 2020 onwards.

Any outstanding returns should be filed and three working days should be allowed to elapse before reinstating the direct debit mandate.

Agents cannot set up direct debit mandates on behalf of clients; the business needs to set up the mandate through their business tax account.

HMRC has confirmed to the Tax Faculty that it will not collect the outstanding balance of deferred VAT when the direct debit mandate is reinstated. HMRC has made the necessary systems change to avoid this happening for businesses in MTD for VAT.

Arrangements will also need to be made to pay the deferred VAT by 31 March 2021; further guidance is awaited from HMRC on this.

28 April 2020
How does it work?
If you defer a payment on account between 20 March 2020 and 30 June 2020 but the balancing payment is outside of these dates, the amount you must pay is the balancing payment less any deferred payments. Deferring payments will not create a repayment.

Who is it for?
You can defer the following VAT payments:

  • quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
  • payments on account due between 20 March 2020 and 30 June 2020
  • annual accounting advance payments due between 20 March 2020 and 30 June 2020

15 April 2020
HMRC have also announced a delay regarding the timescales for a business to have digital links in place for MTD purposes. This has been delayed until the first return on or after 1 April 2021.

3 April 2020
Please note, the deferral does not include VAT MOSS payments or payments of Import VAT (when bringing goods into the UK that are subject to VAT from outside of the EU).

31 March 2020
The deferral will apply from 20 March 2020 until 30 June 2020, this also includes payments on account due be made between those dates.

30 March 2020
Payments that fall due after 30th June should be paid on time as normal

27 March 2020

  1. Deferred VAT payments will be due to be repaid by the end of March 2021
  2. Please note, the deferral does not include VAT MOSS payments.

25 March 2020

  1. Cancel your direct debit to HMRC with your bank to ensure money is not debited from your account. This is relevant for VAT and the income tax deferral.
  2. What don't we know yet? It is stated that all UK businesses are eligible for the deferral. It does not state exactly what is meant by UK businesses.

24 March 2020
First published.

Find out more about Josie Trainor

Josie  Trainor

Josie Trainor

Josie is the Head of Outsourcing.

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