Deferral of the Deferral
One of the first government initiatives announced in response to the coronavirus pandemic was the deferral, until 31 March 2021, of the VAT payment due between 20 March and 30 June 2020.
There was no action needed at the time to be able to do this, the business submitted the VAT Return as usual and simply didn’t pay the VAT due, with the requirement to pay the outstanding amount by 31 March 2021.
As part of his Winter Economy Plan the Chancellor, Rishi Sunak, announced on 24 September that the deadline for paying the outstanding amount will be extended by way of a new deferral scheme. This scheme enables the outstanding amount to be settled by up to 11 interest-free monthly payments starting March 2021, but unlike the initial deferral, THIS MUST BE CLAIMED.
On Tuesday 23 February 2021 HMRC made live the online service enabling businesses to join the VAT deferral new payment scheme. The scheme will close on 21 June 2021 and if you have not joined by then you won’t be able to.
You therefore now have 3 ways to deal with the VAT deferred last year:
Pay the deferred VAT in full by 31 March 2021
Join the VAT deferral new payment scheme
Call HMRC on 0800 024 1222 by 30 June to arrange extra help. You will have to choose this option if you can’t set up a direct debit online.
If you do not do one of these, you may be charged interest or a penalty.
The new scheme will let you choose the number of equal instalments over which you wish to pay the VAT, with the maximum being 11 if you join before 19 March 2021. For each month after that, the maximum number of instalments reduces by 1 down to 8 if you join by 21 June 2021 when the scheme closes. You can therefore choose when to join and can effectively defer starting making payments until June by waiting until then to join the scheme, but of course, your monthly payments will be larger as the final payment will be in January 2022 no matter when the payments start.
In order to join the scheme, you must not have any outstanding VAT Returns from the last 4 years so you must submit these first before applying.
JOIN THE SCHEME
To join the scheme you must have your own Government Gateway account linked to VAT as your agent cannot make the claim for you. If you don’t have one you can create it online.
Once you have the Gateway set up, the process is very simple:
Go to the HMRC Pay VAT deferred due to coronavirus online page
Scroll down and click on the big green JOIN THE SCHEME NOW button
Log in to your Government Gateway
Follow the instructions to select the number of instalments and set up a direct debit.
Done. It is that simple.
Hopefully, this will help you with your cash flow as (fingers crossed) we gradually come out of lockdown.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment, and professional services. Our clients vary in size from self-employed sole traders, small enterprises and medium-sized businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.
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