At the outset of the COVID-19 crisis, one of the first support measures put in place by the Government was to grant businesses the option of deferring VAT payments for liabilities due between 20 March 2020 and 30 June 2020. We know many of our clients utilised this HM Revenue & Customs reprieve, and as we approach the deadline of 31 March 2021, we wanted to ensure you understand what actions you need to plan for in the forthcoming weeks.
Currently, if you are in a position where you are due to pay a deferred liability, you have three options:
- Pay the deferred VAT due amount in full, on or before 31 March 2021.
- Opt in to the new VAT deferral payment scheme when it launches in 2021.
- Contact HM Revenue & Customs if you require further help to pay.
For each of the options, WHA provide an outline of steps you now need to action:
1 Pay your deferred VAT
You can now pay your outstanding liability in full by 31 March 2021.
You do not need to contact HM Revenue & Customs. However, please make sure you make payment using the HM Revenue & Customs VAT payment details, alongside quoting your VAT number as a reference. Subsequent to your payment, HM Revenue & Customs will automatically allocate your payment on 31 March 2021.
2 Opt in to the new VAT deferral payment scheme
If you cannot make payment now, you must opt in to the new HM Revenue & Customs VAT deferral payment scheme. Essentially, this new deferral scheme allows businesses to manage payment of their outstanding deferred VAT bills via an instalment arrangement. A new online ‘opt in process’ will be available in the coming weeks, which can be accessed via your Digital Tax Account. Please be aware that you must take action to opt in yourself, as WHA cannot do this for you due to the fact that agents are exempt from helping in this process.
This instalment arrangement means that instead of paying the full amount by the end of March 2021, you can make up to 11 reduced amount monthly instalments. All these instalments must be paid by the end of March 2022. Importantly, these payments will be interest free.
The new scheme will allow you to:
- Pay your deferred VAT in instalments without attracting interest.
- Select the number of instalments from 2 to 11 equal monthly payments.
There are some additional qualifying criteria you will need to be aware of, which are as follows:
- Your business still has deferred VAT outstanding owed to HM Revenue & Customs.
- You must be up-to-date with your other VAT Return submissions and payments.
- You must opt in before the end of March 2021.
- You must pay the first instalment at the time of you opting in.
Please note, if you decide to opt in to this new scheme, this will not impact on any ‘time to pay arrangements’ you already have agreed with HM Revenue & Customs relating to other debts and outstanding tax.
There are some additional preparation steps you will need to make before opting in:
- You must have your own Government Gateway account. Your agent may have always submitted Returns on your behalf through their agency account, so you may have never set-up your own online VAT account with HM Revenue & Customs. Setting up your own account is an easy process; just follow the online prompts. You can register and/or sign-in to use HM Revenue & Customs services online by following this web link: https://www.gov.uk/log-in-register-hmrc-online-services.
- You must submit any outstanding VAT Returns from the last 4 years to HM Revenue & Customs.
- You must correct errors on your VAT Returns as soon as possible.
- You will need to make sure you clearly calculate how much you owe, including the amount you originally deferred and how much you may have already paid.
You should also plan to:
- Pay what you can, as soon as you can. This will enable the correct deferred VAT balance to be calculated.
- Decide the number of equal instalments you will realistically require to render payments manageable; the range is from 2 to 11 months.
3 Need more help to pay? Do not hesitate to contact HM Revenue & Customs!
If your current circumstances and cash flow will not even allow for a deferred payment plan — and you are struggling to make any payments at this time — it is strongly advised that you contact HM Revenue & Customs ‘Time to Pay’ team for further assistance without delay. Please visit the HM Revenue & Customs web link below for the contact details:
Should you have any questions or need further guidance in regards to any of the options outlined above, then please do not hesitate to contact a member of the White Hart Associates team. As always, we remain available to provide guidance and assistance whatever your circumstances.
In the meantime please stay safe
The White Hart Associates Tax Team
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