Paying deferred VAT

 

On 24 September 2020, Chancellor Rishi Sunak announced a package of new measures to support the economy during the Coronavirus pandemic including additional time to pay deferred taxes.

 

• Businesses that deferred VAT payments which were due between 20 March 2020 and 30 June 2020 to 31 March 2021 will now be able to pay these in up to eleven interest-free instalments.
  • This is an opt-in scheme, legislated for in Finance Act 2021.
  • All instalments must be paid by the end of March 2022.
  • Businesses may select the number of instalments from two to 11 equal monthly payments if they join by 19 March 2021. Businesses who join by:
    • 21 April 2021 will be able to have up to 10 instalments.
    • 19 May 2021 will be able to have up to nine instalments.
    • 21 June 2021 will be able to have up to eight instalments.
• To use the scheme, businesses must:
  • Have deferred VAT to pay.
  • Be up-to-date with their VAT returns.
  • Opt-in: the payment scheme opened on 23 February 2021 and will close on 21 June 2021.
  • Pay the first instalment when they opt-in.
• If businesses opt into the scheme, they can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.
• In preparation to use the payment scheme, businesses must:
  • Ensure they have a government gateway account.
  • Submit any outstanding VAT returns from the last four years. It will not be possible to join the scheme if they have not done so.
  • Correct errors on VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in the deferred VAT balance.
  • Make sure they know how much they owe, including the amount originally deferred and how much already paid (if any).
• Businesses should also:
  • Pay what they can as soon as possible to allow HMRC to show the correct deferred VAT balance.
  • Consider the number of equal instalments they will need, from two to 11 months.
• Agents cannot join the scheme on behalf of clients.
• A penalty of 5% of the deferred VAT outstanding will be charged if businesses have not opted into the payment scheme or made an alternative arrangement to pay by 30 June 2021.
  • The normal Default Surcharge will not apply to deferred VAT.

 

How to pay deferred VAT or join the VAT deferral scheme?

 

Follow this link:  HMRC: deferral of VAT payments

 

VAT errors in deferred period

 

• Where VAT errors are identified on a VAT return that relates to a period covered by the deferral, form VAT 652 should be completed and sent to the VAT error team.
• The balance could then be paid by 31 March 2021 or included in the subsequent deferral payment scheme, where the taxpayer opted in.
• The error correction payment(s) could, prior to 31 March 2021, be included in the deferred balance by contacting HMRC's COVID-19 helpline after:
  • HMRC have processed the error correction.
  • A revised statement of account has been received.
• It is not now possible to include any extra payments in the deferred VAT balance: amounts should be paid as soon as possible as interest will be charged.

COVID-19: Government support tracker

This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.

 

Time to Pay agreement

Business and self-employed taxpayers with outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

 

Correcting VAT errors

What are the time limits? Can you do it through the VAT return? Do you have to notify HMRC?