Between 20 March and 30 June 2020, businesses struggling due to COVID-19 took advantage of one of HMRC’s first implemented measures, which allowed companies to defer VAT payments due in this period, to March 2021.
Recently HMRC announced there will be an extension of this deferral for businesses who are still battling with the impacts of the virus, meaning that payments can be spread over the course of 2021 and through to as late as March 2022.
HMRC is due to open the scheme in the forthcoming weeks but has released guidance in advance, advising those businesses that deferred VAT payments of their options:
• pay the deferred VAT in full on or before 31 March 2021
• opt in to the VAT deferral new payment scheme when it launches in early 2021
• contact HMRC for more help to pay
Should a business want to settle their amount by 31 March 2021, they can do so using the same payment reference as usual (their VAT number) and do not need to contact HMRC to say they have done so.
Alternatively, they can opt in to the VAT deferral new payment scheme. This will mean instead of paying the full amount by the end of March 2021, up to 11 smaller monthly instalments can be made, interest free. All instalments must be paid by the end of March 2022.
The scheme will allow organisations to:
• pay deferred VAT in instalments without adding interest
• select the number of instalments from 2 to 11 equal monthly payments
To use this scheme, organisations must:
• still have deferred VAT to pay
• be up to date with VAT return declarations
• complete the opt in process by 31 March 2021
• make the first agreed instalment payment by 31 March 2021
• be able to pay the deferred VAT by direct debit
Before opting in organisations must:
• create a Government Gateway account
• submit any outstanding VAT returns
• correct any errors on submitted VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in the deferred VAT balance.
• make sure the amount owed is known, including the amount originally deferred and what payments have been made against this amount, if any.
If organisations have difficulty in making these VAT payments, they should be able to agree a time to pay arrangement with HMRC, but should look to do so at the earliest opportunity.