Legal Services

Deferred VAT Payments – What happens next?

VAT payments totalling £30billion were deferred between March and June 2020 and are due for payment before 31 March 2021.

What if you can’t pay your deferred VAT?

HMRC are developing a New Payment Scheme to help those businesses which will not be able to pay their deferred VAT by that date. Unlike the initial deferral, this will not be a universal extension, businesses will need to opt in.

Time to Pay arrangement

Businesses struggling to pay their VAT always have the opportunity to contact HMRC and make a Time to Pay arrangement. The portal being developed offers an automated application system, where businesses can agree to a simple schedule of payments without, it is currently understood, being required to provide the information required for a formal Time to Pay arrangement.

The New Payments Scheme enables businesses to pay the deferred VAT by up to 11 equal instalments, interest free, clearing the deferred amount by 31 March 2022.

The options available to business for VAT payments deferred between March and June 2020 are:

  • Pay the VAT due before 31 March 2021
  • Opt into the New Payment Scheme, and pay by 11 equal instalments
  • Contact HMRC Time To Pay team to agree more tailored support.

Who is eligible for the New Deferred VAT Payment Scheme?

To be eligible for the New Payment Scheme, businesses must be able to pay by Direct Debit, they must have deferred VAT during the March to June window and all VAT returns must be filed up to date as at 6th February 2021.

VAT regulations and guidance to officers are being updated to cover situations were traders deregister whilst they have unpaid deferred VAT, companies joining VAT groups and business transfers.

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It is anticipated that the New Payment Scheme portal will be launched in February or March 2021. Businesses will need to opt in to the scheme before 31 March 2021. It is not currently expected that there will be agent access to the portal, as the process includes authorising the Direct Debits, so business will probably need to sign up for themselves. If, having signed up to the New Payment Scheme, a business is unable to pay other VAT liabilities, there is nothing to prevent them from making a separate Time to Pay arrangement with HMRC at the same time.

Businesses should consider whether they will be able to settle VAT deferred by 31 March 2021 and if not, what help they will need to make arrangements to settle the liabilities. If no contact is made ahead of the 31 March 2021, HMRC will consider the payments to be in default and have the right to start collection action.

Please contact the Menzies VAT team to discuss options to get help from HMRC to settle VAT liabilities via the below form.

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