the money guides
Deferred VAT – AGAIN!
Too Good to Miss: Another VAT Deal from HMRC
Early on in the pandemic the UK government allowed firms to defer VAT from the first quarter of 2020. That was a big help but it was a deferral, not forgiveness. There has been lots of other support since then but that VAT needs to be repaid.
If you took advantage of that deferral, you now have two VAT payments to make within about a month of each other. HMRC has realised this could be a problem for many businesses and is setting up a payment scheme to allow more time to pay this VAT. Entitlement is automatic, like the original deferral scheme; taking advantage doesn’t put you on the VAT penalty ladder and it’s interest-free. In other words, it’s too good a deal to miss but you have to opt in and you must do so before the end of March 2021.
As I write, the scheme has been announced but isn’t yet open, so you can’t opt in for another few weeks. You’ll need to use your Government Gateway account. Make sure you’ve got the login details now so you don’t miss out.
Rather than paying the full amount by the end of March 2021, you can pay by monthly instalments, interest-free, up to March 2022. If you need longer than that, and plenty of companies will, you’ll need a bespoke time to pay arrangement, which can be negotiated with HMRC; if that’s the case, talk to your adviser (or give us a call).
The payment scheme applies to you if you have any remaining deferred VAT. You can choose the number of instalments (one payment when you set it up plus up to 11 equal instalments – I don’t see why you would choose fewer than the maximum 11). As well as being interest-free you can also take advantage of this scheme, even if you have an ongoing time to pay arrangement for other HMRC debts.
Your VAT returns need to be up to date. If you’ve made errors, they have to have been corrected and you need to know how much you owe, which really means knowing how much you originally deferred less whatever you’ve already paid from that amount.Copyright © Chris Lowe, Colobus 2021