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Business Tax  •  Coronavirus Advice  •  VAT

Paying Covid deferred VAT

By RJP LLP on 12 February 2021

New guidance from HMRC has outlined how to register for the online service to pay VAT payments that were deferred between 20 March 2020 and 30 June 2020 due to Coronavirus disruption.

If you still have VAT to pay, a range of payment options exist as this article outlines, but you must register online by 21 June 2021 or risk a penalty.

Note throughout the deferral period, you should have continued filing VAT returns as normal, even if the tax was unpaid.

What deferred VAT payment options exist?

  1. Pay the outstanding VAT amount off in full. This needs to happen by 31 March 2021; or
  2. Join the new VAT deferral scheme if you still need more time to pay. To use the VAT deferral new payment scheme, you should register with the online service, open between 23 February 2021 and 21 June 2021. The new scheme lets you pay the deferred VAT in equal instalments, interest free and you can choose the number of instalments, from two to 11. Note the earlier you join the more payment instalments are available; or
  3. If you can’t pay your VAT and want to discuss a separate Time to Pay arrangement in person, you can also contact HMRC by phone, on 0800 024 1222. The latest date to agree this is 30 June 2021.

What happens if I do nothing?

HMRC are offering more time for businesses to pay their VAT if they do not have the cashflow - provided they get in touch to declare their circumstances and make at least one payment.

If you do not pay your previously deferred VAT in full by 31 March 2021 you must opt into a payment scheme of sorts. Otherwise, you may be charged interest and penalties.

How to join the VAT deferral new payment scheme?

The VAT deferral new payment scheme will be open from 23 February 2021 up to and including 21 June 2021. The last day to register and avoid a penalty is therefore 21 June 2021.

Anyone on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme will be invited to join the scheme later in March 2021.

To use the new online service, businesses and sole traders registered for VAT must:

  • join the scheme personally - your accountant cannot do this for you;
  • still have deferred VAT to pay;
  • know how much VAT is outstanding and how much is already paid (if anything);
  • have a Government Gateway online account;
  • be up to date with your VAT returns;
  • ensure there are no errors on your deferred VAT returns;
  • join by 21 June 2021 at the latest;
  • be ready to pay the first instalment when you join; and
  • pay instalments by direct debit.

You can also still use the scheme if you have other outstanding tax to pay or another Time to Pay arrangement in place.

How do the instalment options work?

The month you join the scheme will determine how many payment instalments are available.

The table outlines the monthly joining deadlines and the number of maximum instalments (including the first payment):

Joining deadline vs Number of instalments

  • 19 March 2021 - payment in 11 instalments
  • 21 April 2021 - payment in 10 instalments
  • 19 May 2021 - payment in 9 instalments
  • 21 June 2021 - payment in 8 instalments

Exceptions: How to use the scheme offline?

There may be circumstances where you cannot use the online service, for example if you:

  • do not have a UK bank account;
  • cannot pay by direct debit; or
  • have dual signatories on your account.

The telephone number for all VAT deferral related queries is 0800 024 1222.

Errors on VAT returns in VAT deferral period

It is important to note that businesses cannot include any extra payments after they have joined the scheme. Any error correction relating to the deferral period that is notified to HMRC after 31 March 2021, cannot be deferred. It is important to ensure your deferred period VAT returns are correct.

If HMRC has carried out a VAT compliance check and found that extra payments are due for the deferral period, they may contact you directly.

For help with your VAT compliance, including checking whether your deferred VAT returns are accurate, contact us via partners@rjp.co.uk.

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If you haven’t yet submitted your 2020 self assessment tax return and paid any tax due, you have until 28 February 2021 to submit your return before a penalty is issued. A 5% surcharge also applies to tax which was due on 31 January and is not paid by 28 February.