VAT deferral new payment scheme – take action by 21 June if you wish to sign up

VAT deferral new payment scheme is available to those businesses that deferred VAT payments between 20 March and 30 June 2020, due to the impact of COVID-19 and now wish to pay this amount by instalments.

What options are there for paying deferred VAT?

IF you were one of the businesses which deferred VAT during this period you currently have three choices:

• To pay the deferred VAT in full now
• To join the VAT deferral new payment scheme, by 21.06.2021
• Contact HMRC by 30.06.2021 if extra help is required

Please note that if extra help is required, you may be charged a 5% penalty and/or interest if it is not paid in full or an arrangement to pay has not been agreed by 30 June 2021.

VAT deferral new payment scheme – how it works

Open until 21 June 2021, the VAT deferral new payment scheme allows you to pay the previously deferred VAT, interest free in equal instalments. Depending upon when you join the scheme, there is choice in the number of instalments, from 2 to 11. If you haven’t yet joined, then from 20 May until 21 June 2021 (the latest you can join) the number of instalments available to pay your deferred VAT is 8.

VAT deferral new payment scheme – how to join

To join the new VAT deferral scheme, you must have your VAT registration number and a HMRC online services account (which you can create here)

Where applicable, you must also have submitted any outstanding VAT returns form the last 4 years to be eligible to join the scheme.

Any errors on your VAT returns should be corrected as soon as possible and in order to use the scheme you will need to know how much you owe in VAT, the amount you originally deferred and any sums already paid.

When using the online service, you will need to make the first instalment at the time you join and instalments must be paid by direct debit.

If you cannot pay by direct debit or if you do not have a bank account in the UK, have dual signatories on your account, you can contact the COVID-19 helpline and they will be able to assist.

You can still join the scheme if you have a Time to Pay arrangement for other HMRC debts or outstanding tax.

Errors on VAT returns during the deferral period

The VAT deferral period covered accounting periods for February, March and April 2020. Additionally, it also included May 2020 for payment on account customer and certain non-standard tax periods.

If an error is noticed on a VAT relating to this period, form VAT652 should be completed and sent to the VAT Error Correction Team.

Can you defer extra payments resulting from error corrections? into the VAT deferral new payment scheme

Extra payments cannot be included in the VAT deferral new payment scheme once the scheme has been joined. Any errors relating to the original deferral period that is notified to HMRC after 31.03.2021 cannot be deferred and interest must be paid.

If you are unable to pay deferred VAT or join the VAT deferral new payment scheme

If you remain unable to repay deferred VAT and are unable to join the VAT deferral new payment scheme and pay in instalments, you should contact HMRC to discuss your circumstances. Dependent upon your circumstances, it may be helpful to discuss this with your accountant or tax advisor first and to make sure you fully understand all your current and future tax liabilities before speaking to HMRC.

Alexander & Co – expert tax and VAT advice

At Alexander & Co, we can help you navigate the complex world of VAT legislation. VAT affects all businesses and the financial penalties can be extremely high, due to non-compliance. We can provide VAT specialists that will assist you with any compliance issues and help to minimise liabilities and penalties, should you find yourself in the midst of a VAT investigation.

Our chartered tax advisors can assist you in reducing your tax liabilities, maximising your wealth and easing the administrative burden of tax compliance.

We are on hand to provide comprehensive and professional tax advice, with our services ranging from personal to corporate tax. Contact us today on 0161 832 8481, email info@alexander.co.uk or complete the contact form below and we will be touch.