HMRC launches VAT payment deferral scheme

If your business deferred some VAT in 2020 due to coronavirus, you might be bracing to pay it back by 31 March 2021.

Holiday window. The optional payment holiday window introduced by the government in 2020 applied to VAT owed by your business between 20 March and 30 June 2020. This was mainly relevant to VAT return periods up to the end of February, March and April but it also applied to payments on account due between those dates for users of the annual accounting or large payer schemes.

Extension. The government confirmed that the 31 March 2021 cliff-edge repayment date could be avoided if your business took advantage of a new eleven-month optional VAT payment scheme . The details of the scheme have now been announced (see The next step ).

Mechanics. You must opt into the new payment scheme. The process will be available in early 2021. Instead of paying the full amount owed by the end of March 2021, you can make up to eleven smaller instalments, interest free. All instalments must be paid by the end of March 2022. Tip. You will select the number of instalments you want to make at the time of registering for the scheme. You can choose any number between two and eleven. Tip. You must opt into the VAT payment scheme yourself as the business owner, your accountant or tax advisor cannot do this for you.

Prepare. Before opting into the scheme, you must create your own Government Gateway account if you don’t already have one. All outstanding VAT returns must have been submitted for the last four years. You must also be clear about the amount of VAT that you originally deferred, less any payments you have made since then. Tip. If you still cannot pay your VAT, contact HMRC for further assistance and a possible time to pay arrangement.

The VAT payment scheme means you can spread the deferred VAT over eleven months, avoiding the 31 March 2021 cliff-edge.
Ensure you have a Government Gateway account, and know how much you owe before opting in.

We hope you find this information useful and we will continue to keep you updated on any further developments through email newsletters, social media and our website.