HMRC’s VAT deferral new payment scheme opening date announced!

HMRC’s VAT deferral new payment scheme opening date announced!

In March 2020, a Payment Scheme was introduced by the Government to help businesses pay deferred VAT. Deferred VAT is due to be paid at the end of March 2021. However, under the new payment scheme, businesses will be able to make 11 smaller interest free repayments in the 12 months to 31 March 2022. 

If you deferred VAT payments due between 20 March and 30 June 2020 and still have payments to make, you will be able to: 

• pay the deferred VAT in full, on or before 31 March 2021 
• join the VAT deferral new payment scheme between 23 February and 21 June 2021 
• contact HMRC before 30 June if you need further support/help to pay (telephone: 0800 024 1222).

You may be charged interest or a penalty if you do not meet these deadlines, outlined by HMRC. 

Under HMRC’s guidance surrounding the new payment scheme, it explains that to use it you must: 

• opt in before the end of March 2021 
• still have deferred VAT to pay 
• be up to date with your VAT returns 
• pay the first instalment before the end of March 2021 
• be able to pay the deferred VAT by Direct Debit.

You must opt in yourself; your agent cannot do this for you. The VAT deferral new payment scheme will be open from 23 February up to and including 21 June 2021. 

If you plan to opt-in, we suggest you don’t leave it to the last minute. Before opting into the scheme, 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 
• ensure you are aware of how much you owe, including the amount you originally deferred and how much you may have already paid. 

If you are on the VAT Annual Accounting Scheme or make VAT Payments on Account, you will be invited to join the new payment scheme later in March 2021. 

If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax. 

Deferring extra payments resulting from error corrections 

You will be able to contact HMRC’s COVID-19 helpline (telephone: 0800 024 1222) if you want to defer extra payments resulting from error corrections, but you can only do so after both of the following have happened: 

• HMRC have processed your error correction 
• you’ve received a statement of account confirming the balance. 

After joining the scheme, you cannot include extra payments. Any error correction relating to the deferral period that is notified to HMRC after 31 March 2021 (previously 29 January 2021), cannot be deferred.   

Instalment options  

The maximum number of instalments available to you will be determined by the month you join the VAT deferral new payment scheme. For example, if you join the scheme in March 2021, you will have the opportunity to pay your deferred VAT in 11 instalments or less.  

The table below outlines the number of instalments available to you, dependent on the month you join: 

We are here to help

We are here to provide help wherever this is required. If you require further advice or guidance on any areas mentioned above, please get in touch with your usual Azets contact or contact a member of our VAT & Indirect Tax team. 

To view HMRC’s full guidance, visit: www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19