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VAT payment deferrals – opting into the new payment scheme

The government has announced that deferred VAT payments for the period between 20 March and 30 June 2020, which are now due on 31 March 2021, can now be paid in instalments.

Businesses can use the New Payment Scheme to spread these payments over equal instalments up to 3‌1‌‌ ‌‌March 2022. You will need to opt-in to the scheme, and for those who do, this means that your VAT liabilities due between 20 March and 30 June 2020 do not need to be paid in full until the end of March 2022.

Alternatively, they can make payments as normal by 3‌1‌‌ ‌‌March 2021 or make Time To Pay arrangements with HMRC if they need more tailored support.

Opting in to the new payment scheme

The online opt in process will be available in early 2021 and you must opt in yourself, your agent cannot do this for you.

Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller interest-free monthly instalments. All instalments must be paid by the end of March 2022.

The scheme will allow you to:

  • pay your deferred VAT in instalments without adding interest
  • select the number of instalments from 2 to 11 equal monthly payments

To use this scheme you must:

  • still have deferred VAT to pay
  • be up to date with your VAT returns
  • opt in before the end of March 2021
  • pay the first instalment when you opt in

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 to the new payment scheme

Before opting 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
  • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid

You should also:

  • 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, from 2 to 11 months

Claiming a refund

HMRC have confirmed that where taxpayers wanted to defer VAT payments, but did not manage to cancel their Direct Debit in time they can claim a refund. Taxpayers can submit a Direct Debit Indemnity Claim to their bank, ensuring that they state they want to claim a refund under the Direct Debit Indemnity Scheme (DDI). There is no time limit in making this request.

For help and advice with managing your business through the coronavirus outbreak, contact Ann Bibby on abibby@ellacotts.co.uk or 01295 250401.