TT344: VAT Payment Deferral

March 17, 2021

When the COVID-19 pandemic first struck the UK in the early part of 2020, HM Treasury provided a number of forms of assistance to taxpayers and businesses and one of those was the VAT Payment Deferral scheme. The scheme covered VAT periods ended in February 2020, March 2020, April 2020 and in some cases May 2020, but VAT deferred for one of those periods becomes due and payable on or before 31st March 2021.

However, additional assistance has been announced for those facing liabilities that are otherwise due on or before the 31st March 2021 deadline in the form of the VAT Deferral New Payment Scheme. This will remain open until 21st June 2021, the date on which all COVID restrictions are supposed to be removed.

There are thus three courses of action available to anybody who deferred VAT under the original arrangements and these are:-

  1. Pay up the outstanding VAT by 31st March 2021; or
  2. Opt into the VAT Deferral New Payment Scheme on or before 21st June 2021; or
  3. Agree extra help to pay with HMRC by 30th June 2021.

Failure to do at least one of these things may result in the incursion of a penalty and/ or interest so it is important to take action now.

It is also important to note that the VAT Deferral New Payment Scheme allows access to an instalment option free of any further interest, so the scheme does represent a real saving.

Not only that, depending on the date on which you opt into the scheme, the maximum number of instalments available to you changes. The later you join the scheme the fewer instalments you are eligible to use for the purposes of paying your balance. It is up to you to pick, subject to the maximum, the number of instalments you want to utilise, with the minimum being two. The maximum number of instalments you can choose, depending on the date of entering into the scheme, is as follows:-

  1. If you join the scheme by 19th March 2021 you can choose up to 11 instalments;
  2. If you joint the scheme on or before 21st April 2021 you can choose up to 10 instalments;
  3. If you join the scheme on or before 19th May 2021 you can choose up to 9 instalments;
  4. If you join the scheme up to 21st June 2021 you can choose up to 8 instalments.

The application has to be made by the taxpayer and has to be made online using you Government gateway account and it is important when applying that you know what your original deferred VAT was, how much of it you have paid and therefore how much of it is still outstanding. You will need to pay the first instalment when joining the scheme and you will also need to have the remaining instalments collected by direct debit, although there are facilities for those for whom that is problematic. If this affects you, you should call the helpline on 0800 024 1222 and HMRC will do their best to grant you access to the scheme according to your circumstances.

Please note that this is only available to those who have VAT deferred under the terms of the original offer – it is not just a general offer to defer VAT liabilities.

You will also need to make sure that your VAT affairs are up to date and there are no outstanding returns for the last 4 years that need to be filed otherwise you will not be able to access the scheme.

This does represent a good opportunity to receive further assistance free of interest and so for those where cashflow is going to be stretched, even over the coming months as lockdown is supposedly gradually released, this will potentially be very beneficial.

Naturally, if you have any questions regarding the above please do not hesitate to get in touch with your Barnes Roffe contact partner.

Talk to Barnes Roffe today
Share this page:
Contact Us
ICAEW The Chartered Institute of Taxation ACCA IPG IR