Deferred Vat: What you need to know

If you deferred your VAT payments between 20 March and 30 June 2020 and still have payments to make, you may be concerned what you need to do now, especially if your business circumstances are still challenging, and you’re worried you may not be able to pay.

The good news is HMRC have created a new payment scheme which launched on 23rd February so you can defer your VAT. You have until 21st June 2021 to opt in.

VAT deferral payment scheme

Instead of having to pay the full amount on 31 March 2021, you can make smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.

To be eligible for this scheme, you must:

• Still have deferred VAT to pay
• Be up to date with your VAT returns
• Opt-in by 21st June 2021
• Be able to pay the deferred VAT by Direct Debit

If you opt-in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

Get ready to opt in

The new VAT deferral payment scheme is open until the 21st June 2021. In order to opt in you must:

• Create your own Government Gateway account if you don’t already have one
• Submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
• Correct errors on your VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in your deferred VAT balance
• Make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
• Pay what you can as soon as possible to allow us to show the correct deferred VAT balance
• Consider the number of equal instalments you’ll need

Implications if you cannot make payments

If you pay late or cannot make payments, you will be charged interest and may receive a penalty. To potentially avoid penalties, you need to contact HMRC as soon as possible. Head over to the Gov website to read your options if you cannot make payments.

Other cash flow solutions

Besides deferring your VAT, there are other measures to help if you are having cash flow difficulties:

• Apply for a Recovery Loan Scheme. This is a government backed loan that can help businesses access finance. The scheme ends on 31st December 2021. Read our full article here to find out if you’re eligible, and how you can access this lending.
• Get a Company Voluntary Arrangement (CVA) – If your company is insolvent, liquidation is not your only option. A CVA can help give you some breathing space in order to sort out your finances and catch up with payments. Read our full article about CVA’s and your options here.
• You can still make claims via the Coronavirus Job Retention Scheme until September 2021
• Apply for a ‘Breathing Space’ if you’re struggling with debt. Read our full article here for full details and eligibility.
• Visit our Coronavirus Business Advice Hub for advice on best cash flow management practices.

We cannot set up the VAT deferral plan for you, but we can support you in making a decision of whether to opt-in and discuss your options if you have further cash flow concerns.

Contact your Principal Adviser or get in touch with one of our advisers by emailing enquiries@a4g-llp.co.uk or calling 01474 853 856.