As part of the Government support packages, VAT-registered businesses had the option to defer VAT payments between 20 March 2020 and 30 June 2020 to help cash flow during the height of the coronavirus pandemic.
The deadline for repaying the deferred VAT is 30 June 2021.
If arrangements are not made by this date, businesses incur a penalty of 5% and/or interest, chargeable in relation to the amount of the deferred VAT that remains outstanding for payment at 31 March 2021.
The options available to businesses to avoid the 5% penalty are:
– pay the deferred VAT in full by 30 June 2021;
– opt into the new VAT deferral payment scheme – online by 21 June 2021;
– make alternative payment arrangements with HMRC on or before 30 June 2021.
Paying the deferred VAT in full
HMRC has confirmed that it will not charge penalties or interest where a business pays its deferred VAT in full by 30 June 2021.
The VAT deferral new payment scheme
As reported in our blog on 18 February (see here), businesses have the option to join the VAT deferral payment scheme, they must do this by 21 June 2021, when the online portal for applications will close.
Businesses joining the scheme will not be charged a penalty and will be able to pay their deferred VAT in two to eleven interest-free instalments (subject to when you joined the scheme). The first instalment is payable upon joining the scheme.
Those unable to use the online portal can call HMRC’s Coronavirus Helpline (0800 024 1222) to join the scheme until 30 June 2021.
To get started, simply click this link and have your VAT registration number and Government Gateway ID to hand.
Agreeing a ‘time to pay’
Where businesses do not have the resources for the above two options, contacting HMRC by 30 June 2021 to agree a time to pay arrangement will avoid the 5% penalty.
However, unlike the above option, VAT repayments will not be interest free.
Get in touch
For advice and support in understanding the VAT deferral deadlines, the new payment scheme, or for help with any other VAT related queries, please contact Andrew Kirkaldy using the button below.