Flower Blossoming Banner Image.

HMRC’s new VAT deferment scheme explained.

HMRC has updated guidance on how to register for the online service to pay VAT payments deferred between 20th March and 30th June 2020 due to the covid-19 pandemic.

Author

Richard McNeilly

Last year saw the Government provide VAT registered businesses with cash flow help during the first lockdown by offering to defer their VAT liability arising between 20th March and 30th June 2020.

This deferment ends soon and HMRC will expect full payment by March 31, 2021. However, for those companies that still have VAT payments outstanding, there are now a number of payment options, with online registration open until 21st June 2021.

Joining the new scheme
The VAT deferral new payment scheme will open from 23rd February up to and including 21st June 2021. Unlike the original deferral scheme, the ‘New Payment Scheme’ will not be applied automatically. Businesses will need to opt-in to the scheme.

The new scheme allows you to pay your deferred VAT in equal instalments, interest free; and choose the number of instalments, from two to 11 (depending on when you join).

To avoid penalties and interest a business must either:

  1. Pay all deferred VAT before the end of March 2021

  2. Opt into the new scheme by the deadlines

  3. Contact HMRC to agree some other arrangement

Instalment options
The point at which you join the scheme determines the maximum number of instalments that are available. For instance, if you join the scheme in March you’ll be eligible to pay your deferred VAT in 11 instalments or fewer.

Further details of the instalment options can be found below:

If you join by:

Number of instalments:

19th March 2021

11

21st April 2021

10

19th May 2021

9

21st June 2021

8

Agents are not allowed to opt in on their clients’ behalf – the business will need to do this themselves, and will therefore need to be able to access the Government Gateway account.

.

What next?

Our market-leading Tax team are on-hand to offer their expertise. If you have any questions, contact us.