VAT – Time To Pay Up?

As part of the Covid financial support package, all VAT registered businesses had their VAT payments deferred automatically for amounts due to be paid in the period from 20 March to 30 June 2020. This automatic deferral also meant no interest or penalties being charged, with businesses being given the flexibility to subsequently pay relevant amounts based on their ability to do so.

The one set factor was that all deferred VAT had to be paid in full by 31 March 2021 at the latest. That date is now fast approaching.

New Deferral?

Given we are still in lockdown, and many businesses still suffering, the Chancellor has now agreed to extend the time period to pay this deferred VAT. However crucially, this only applies to paying the VAT originally deferred, not deferring any additional VAT that has subsequently fallen due.

The new opportunity is to extend payment until January 2022.

Join The Scheme

To take advantage of this new deferral it is necessary to contact HMRC to arrange a specific payment plan. The new scheme allows you to pay the deferred VAT in equal instalments, interest free, up to a maximum of 11 instalments, depending on when you first access the scheme.

If not don’t contact HMRC there is a rise of penalties being incurred as well as the late payment interest.

23 February

To join the scheme there is an online portal tax opens on 23 February and remains available until 21 June 2021. Businesses will need to access the portal themselves – unfortunately it has been designed in such a way that tax agents (e.g. Elman Wall) cannot arrange this. Given the link between the number of available instalments and accessing the scheme, it perhaps is important to join as early as possible. However it should be noted that the first instalment payment needs to be made when you join.

Do You Meet The Conditions?

There are some conditions that need to be met before you can join the scheme.

These include:

  • Being up to date with VAT returns. There should be no outstanding VAT returns from the last 4 years;
  • Actually having the original deferred VAT outstanding (as opposed to a subsequent period);
  • Be prepared to set up a direct debit for the payments, although there are other options for exceptional circumstances where this cannot happen;
  • HMRC will still allow businesses to join the scheme even if they have entered into other arrangements for other taxes.

If a business can’t use the online portal, they should call HMRC on 0800 024 1222 to arrange a payment plan, and this telephone service will be open until 30 June 2021.

If you require more information or would like to get in touch for help and advice, give us a call on 0207 600 5667 or contact our Director and Head of Tax, Russell Eisen, at russell.eisen@elmanwall.co.uk

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