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Deferred VAT: new payment scheme

Deferred VAT: new payment scheme

Monday, 15 February 2021

On 20 March 2020, the Government made an announcement that VAT payments could be deferred for liabilities arising between 20 March and 30 June 2020, in order to support businesses during the COVID-19 crisis.

There was no requirement to opt in. However, under the terms of the scheme, any deferred VAT would be due for payment in full by 31 March 2021.

In September, it was announced that businesses, who’d taken advantage of the VAT deferral scheme, would be able to opt in to a new payment scheme, allowing them to repay the deferred liability over 11 monthly instalments from 31 March 2021.

However, the key point is that businesses will have to opt in to this payment scheme, otherwise the liability will become due on 31 March 2021 and HMRC will begin chasing for payment.

How does it work?

The new payment scheme allows you to pay the deferred VAT over a maximum 11 monthly instalments that are interest free, instead of a full payment on or before the 31 March. These instalments must settle the full amount of deferred VAT by the end of March 2022.

The new payment scheme won’t be applied automatically like the deferral itself was; instead a business will have to opt into it. The option to opt into the scheme will become available in early 2021.

There are a few requirements

To use the scheme you must:

  • Still have deferred VAT to pay

  • Be up to date with your VAT returns

  • Opt in before the end of March 2021

  • Pay the first instalment before the end of March 2021

  • Be able to pay the deferred VAT by direct debit

If you meet all these requirements, then you’re likely to be able to opt in to the scheme. Before early 2021, we recommend that you get yourself ready as there are things you’ll need to do first.

What must you do now?

Before opting into the scheme, you need to:

  • Submit any outstanding VAT returns from the last four years

  • Correct errors on your VAT returns. Corrections may not show in your deferred VAT balance if they’re received after 31 December, so it’s important you correct errors as soon as possible

  • If you don’t already have one, you must create your own Government Gateway account

  • Make sure you know how much you owe

  • Work out the number of equal instalments you’ll need, from 2 to 11 months

The portal where you opt in to the new payment scheme will be open from 23 February until 31 March, so we recommend making a diary note so that you don’t inadvertently miss the deadline and create an unwanted and avoidable cashflow issue.

Need help?

If you’d like to find out more about the deferred VAT payment scheme, please contact a member of our VAT Team. You can find contact details on the Our People section of the website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk

Rob Skilton

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