What you need to know if you have deferred VAT payments 16

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n March 2020, HMRC announced that business owners could defer VAT payments due between 20th March and 30th June 2020 to 31st March 2021, as a result of Covid-19. This was a lifesaver to many businesses who were struggling to manage their cash flow.  

If you deferred your VAT payments, we have put together some information you need to know… 

What if I can’t pay my VAT by 31st March? 

If you are worried about being unable to pay your deferred VAT payments as we approach the 31st March deadline, there are three payment options available to you: 

Option 1 – Pay in full by 31st March 2021 – If you have the necessary funds available to pay the full amount of VAT due, you can make the payment any time before 31st March 2021. 

Option 2 – Pay in instalments by 2022 – If you are unable to pay the full amount by the 31st March 2021 deadline, you can choose to pay the full amount in 11 interest free monthly instalments instead. 

Option 3 – Choose your instalments to pay by 2022 – If you want to pay in instalments, you can choose to split the full amount into 2 to 11 equal payments. All instalments must be paid and the balance cleared by 31st March 2022.   

What happens if I do not pay the deferred VAT? 

You may be charged interest or a penalty if you do not: 

  • Pay the deferred VAT in full by 31st March 2021 
  • Opt into the new payment scheme by 21st June 2021 
  • Agree extra help to pay with HMRC by 30th June 2021 

How do I opt into the new deferral scheme for 2022? 

If you cannot pay the full amount of VAT due by the end of March this year, you can defer to 2022 by opting into the VAT deferral new payment scheme. The scheme will be open from 23rd February up to and including 21st June 2021. 

To join you must: 

  • Join the scheme yourself, your accountant cannot do it for you 
  • Still have deferred VAT to pay 
  • Be up to date with your VAT returns 
  • Join by 21st June 2021 
  • Pay your first instalment when you opt in to the scheme 
  • Pay your instalments by Direct Debit 

To opt into the scheme you will need to go to your Government Gateway account. 

If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax. 

The sooner you join the scheme, the more instalments you will have available to you. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer, however if you wait to join until June you will only have a maximum of 8 instalments. 

What if I don’t have any funds at all? 

If you don’t have the funds to pay the balance in full or in instalments, you should get in touch with HMRC as soon as possible on 0800 024 1222 to discuss your options and find out what further help is available. 

If you need any help or advice on deferred VAT payments or managing your cash flow, please feel free to get in touch with us here at Magpie Accountancy. 

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