Updated guidance on VAT deferral scheme

Further guidance has now been issued by HMRC on how to repay VAT deferred in 2020.
The original deferral scheme introduced by HMRC in response to COVID-19 to help VAT registered businesses manage their cash flow, confirmed that all payments of VAT to HMRC due between 20 March 2020 and 30 June 2020 could be deferred until 31 March 2021.
Following a further announcement by the Chancellor, businesses will now be able to choose to make up to 11 equal instalments over 2021-22 as part of the VAT deferral new payment scheme.

Paying deferred VAT - the options

Businesses that deferred VAT payments can either pay the deferred VAT in full on or before 31 March 2021; contact HMRC on 0800 024 1222 by 30 June 2021 if they need more assistance to pay or register for the new payment scheme between 23 February and 21 June;

The VAT deferral new payment scheme – how it works

The VAT deferral new payment scheme extends the original deferral and allows businesses to make interest free, smaller monthly instalments.  Businesses are also able to select the number of monthly instalments they wish to make (up to 11, dependent on when they join the scheme). All instalments must be paid by 31 March 2022.
Businesses will need to use their Government Gateway to join and will be able sign up from 23 February up to and including 21 June 2021. Any businesses on the VAT Annual Accounting Scheme or Payment on Account Scheme will be invited to join in March 2021.
To take advantage of the new payment scheme, businesses must:

  • still have deferred VAT to pay
  • be up to date with VAT returns
  • be able to pay the deferred VAT by Direct Debit.
  • join using their Government Gateway account
  • sign up by 21 June 2021
  • submit any outstanding VAT returns from the last four years.
  • correct any errors on submitted VAT returns ASAP.
  • ensure the amount owed is known (including how much was originally deferred and the amount already paid)

Contact us for more information or read the full HMRC guidance