Urgent action needed to spread the payment of deferred vat bills


March 18, 2021|In KRW Tax news|By Keith Witchell

Almost a year ago, on the eve of the first lockdown, the Chancellor announced that businesses could defer their quarterly VAT liability falling due in April/May/June 2020 until the end of the tax year.

Rishi Sunak then went on to announce the option of spreading out the payment of the deferred VAT bills over a further year in his Winter Economy Plan last autumn.

So, what are the options to settle the deferred VAT?

If you’d prefer to settle it in one go you need to do so by 31 March 2021. Deferred VAT can be paid in the normal way using the usual reference numbers. There is no need to contact HMRC.

Alternatively, you can join the VAT deferral new payment scheme. This scheme opened on 23 February 2021 and will remain open until 21 June 2021. It requires you to opt in to use it, and since interest and surcharges can be added after 31 March 2021, we strongly advise anyone wishing to use it to opt in this month.

The deferred VAT liability can be spread over a number of equal instalments over the next 12 months, interest-free. The number of instalment payments available is determined by when you join the scheme, as follows:

Opt-in byMax no. of instalments
19 March 202111
21 April 202110
19 May 20219
21 June 20218

We’d therefore recommend opting in as soon as possible to allow maximum flexibility and to minimise the impact on your cashflow as the economy starts to recover post COVID.

Unfortunately joining the scheme is not open to us as agents on your behalf, and must be done by the business itself, using their Government Gateway account (which can be set up as part of the process if not already in place).

However, we will be on hand to assist with any questions.

To be able to join the scheme you must not have any overdue VAT returns in the past 4 years, and you’ll need to know the amount you owe (i.e., the deferred amount less anything you may have paid towards it already).

You will also need to make the first instalment payment when you join, with a Direct Debit to be set up for the remaining instalment payments.

You can join the scheme using this link which takes you to the Government Gateway login page. From here you will have the option to join the VAT deferral new payment scheme.

For further advice on this matter, please contact your Client Manager.

Key Facts

  • VAT bills deferred from April/May/June 2020 fall due for payment by 31 March 2021
  • These liabilities can be spread out over a period of up to one year interest-free
  • However, businesses have to opt in this month to benefit
  • 5Opting in by 19 March 2021 allows up to 11 equal instalment payments
  • You need to opt in by 21 June 2021 and we’d advise doing so this month

For further advice on this matter, please contact me.

Keith Witchell

Director