Did you defer your VAT due to COVID?

*Updated 23 February 2021*

The VAT Deferred payment scheme is now open and can be applied for using the following link: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19

If you have any queries regarding the scheme, please contact your usual AAB contact.

As the impact of the COVID-19 pandemic was becoming clear, the government announced that businesses could defer any VAT payments due between 20 March and 30 June 2020. Originally it was intended that businesses would be required to make repayment on 31 March 2021. However, the Chancellor announced in his Winter Economy Plan that businesses would have the choice to pay their deferred VAT liability over a maximum of 11 equal instalments. HMRC have recently provided further information on how businesses can join the VAT deferral new payment scheme.

Businesses which still have outstanding deferred VAT payments can either pay the deferred VAT in full, on or before 31 March 2021, join the VAT deferral new payment scheme or contact HMRC if extra help to pay is required. To avoid interest and penalties, it is advised businesses take one of the above steps to pay their deferred VAT liability. If a business wishes to pay their deferred VAT in full by 31 March 2021, they do not need to contact HMRC.

How does the VAT deferral new payment scheme operate?  

The online sign up for the VAT deferral new payment scheme will be accessible from 23 February 2021 and will close on 21 June 2021.

For businesses on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, an invitation to sign up to the new payment scheme will be issued later in March 2021.

This new scheme allows businesses to pay their deferred VAT in equal, interest free instalments. The number of instalments can be anything from 2 to 11 payments. The maximum term is determined by when the business joins the scheme:

If You Join By:	Maximum Number of Instalments Available
19 March 2021	11
21 April 2021	10
19 May 2021	9
21 June 2021	8

 

Businesses should note that the first instalment is due when signing up for the scheme.

Are you able to join the new payment scheme? 

Before a business is eligible to join the scheme, they must:

• Create a Government Gateway account, if they do not already have one;
• Submit any outstanding VAT returns from the last 4 years;
• Correct any errors on their VAT returns as soon as possible; and
• Be aware of how much deferred VAT is outstanding, including the original deferred amount and how much has already been paid.

Can I sign up to the online service? 

To use the online service to pay any outstanding deferred VAT, a business must:

• Apply to join the scheme itself.  Importantly, an agent cannot do this on behalf of their clients as the business will be required to set up a direct debit at the time of joining
• Be up to date with their VAT returns
• Join by 21 June 2021
• Be in a position to pay the first instalment when they join
• Pay the subsequent instalments by Direct Debit

A business will not be able to use the online service if:

• It does not have a UK bank account,
• It cannot pay by Direct Debit; or
• It has dual signatories on the account.

However, if a business still wants to join the new payment scheme, they can contact the HMRC COVID-19 helpline on 0800 024 1222 when the scheme opens on the 23rd February.

How can AAB help? 

Although we are not able to apply to join the new payment scheme on your behalf; our indirect tax team have significant experience of assisting businesses with time to pay arrangements. Should you have any queries about the new scheme, our indirect tax team can assist.

If you require further information or support in relation to the COVID VAT deferral or your regular VAT obligations, please contact Alistair Duncan, Indirect Tax Director, or your usual AAB contact.