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Catching up on deferred VAT payments

Date posted: 11th Jan 2021

HM Revenue & Customs (“HMRC”) have announced that those businesses which deferred VAT payments between 20 March 2020 and 30 June 2020, have the following options to settle the outstanding liability:

  • Pay the deferred VAT in full by 31 March 2021.
  • Opt into the “New Payment Scheme” (available early 2021) and agree to spread the VAT of a time period – potentially up to 11 months.
  • Contact HMRC if you need more time to pay the outstanding liabilities.

To be able to use the “New Payment Scheme”, a business must:

  • Still have deferred VAT to pay.
  • Be up to date with the VAT returns.
  • Be able to pay the deferred VAT by Direct Debit.
  • Opt into the scheme by 31 March 2021.
  • Pay the first instalment by 31 March 2021.

HMRC have also stated that you can opt in, even if you have a time to pay arrangement for other HMRC debts and taxes. However, this contrasts with the guidance in relation to the deferral of Self Assessment tax liabilities which states that you cannot set up a payment plan if you have other payment plans or debts owed to HMRC. This could therefore particularly impact upon unincorporated businesses who may need to take advantage of both payment plans. We would hope that HMRC would be sensible in this regard but it may be a wise idea to set up a payment plan for your Self Assessment liabilities first!

Further details are online at https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19 – however, if you have any queries regarding the payment of your VAT liabilities, please contact us.

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