To support businesses during the COVID-19 crisis, the Government announced on 20 March 2020 that VAT payments would be deferred for a three month period.
This VAT Deferral:
- was available to all UK VAT registered businesses (including non-established taxable persons);
- applied to payments due between 20 March 2020 and 30 June 2020 (except for VAT MOSS payments); and
- was automatic, with no application or notification of HMRC required.
Businesses were not required to make VAT payments during the deferral period, and were instead initially given until 31 March 2021 to pay any liabilities which accumulated. However, it was further announced on 24 September 2020 in the Chancellor’s Winter Economy Plan that, rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22 (see below).
HMRC did not charge interest or penalties on any amount deferred.
Scope of the deferral
The practical effect of the deferral is that payments for returns for the quarters ended 29 February 2020 (if not already paid by 20 March 2020), 31 March 2020 and 30 April 2020 do not have to be paid until 31 March 2021 at the earliest (later if the business opts into the New Payment Scheme – see below).
If a payment on account due between 20 March 2020 and 30 June 2020 was deferred, but the balancing payment was outside of these dates, the amount payable was the balancing payment less any deferred payments. Deferring payments will not create a repayment.
HMRC informed us that the following did not qualify for deferral:
- Payments of import VAT, Customs Duties or other taxes (such as Insurance Premium Tax, Machine Games Duty etc.) unless covered by another Government announcement.
- VAT due to be paid in relation to disclosures and assessments due to HMRC.
- Time To Pay (TTP) arrangements for payments due before 20 March 2020.
Operation of the deferral
During the deferral period, VAT returns still had to be filed, and the normal filing deadlines continued to apply.
VAT refunds and reclaims also continued to be processed as normal. If a business deferred a payment and then submitted a repayment claim in a later quarter, HMRC indicated that they would offset that repayment against existing debt from before the deferral period (in the normal way), but would not set it against any deferred VAT payments.
Paying deferred VAT
Businesses that deferred VAT payments can either:
- pay the deferred VAT in full on or before 31 March 2021;
- opt into the new payment scheme when it launches in 2021; or
- contact HMRC (if they need more help to pay).
The online opt in process for the new payment scheme will be available in early 2021 – we are still awaiting confirmation of the date. Instead of paying the full amount deferred by the end of March 2021, this scheme allows businesses to make smaller monthly instalments, interest free. Businesses can select the number of monthly instalments they wish to make, which must be between two and eleven. All instalments must be paid by the end of March 2022.
How do I opt into the VAT Deferral Scheme?
In order to opt into the scheme, businesses have to be up to date with their VAT returns and be able to pay by direct debit.
As the scheme requires a direct debit to be set up, businesses must opt in themselves and agents cannot do this on their behalf.
Before opting in, businesses must:
- create their own Government Gateway account if they don’t already have one;
- submit any outstanding VAT returns from the last four years;
- correct errors on their VAT returns as soon as possible (corrections received after 31 December 2020 may not show in the deferred VAT balance);
- consider the number of equal instalments they wish to make (from two to eleven months); and
- make sure they know how much they owe, including the amount originally deferred and how much they have already paid.
More information can be found in HMRC’s guidance on GOV.UK.
We would like to thank ATT for the information contained within this blog.
If you are interested the COVID19 support grants available to you , we have information for you here.
We have been working hard to continue to keep you updated as the Government releases new information and are doing everything we can to support our clients during this uncertain period, please do not hesitate to contact us here if you have any concerns or queries.
HB Accountants is here to help you find optimum tax efficiency: giving you access to experienced accountants and useful information and support no matter your business size or sector. If you would like a no obligation discussion about how we can help you, please feel free to contact the team on 01992 444466. We’re accountants for business and we’re here to help you grow.
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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above