All VAT registered businesses had their VAT payments deferred automatically, for amounts due to be paid in the period 20 March to 30 June 2020. The direct debit to pay that VAT was not collected by HMRC, and no interest has been charged on that debt.
Those businesses could pay that VAT debt at any time, but now they must pay it in full by 31 March 2021 or make arrangements with HMRC to spread the payment of the debt over a number of months.
The online portal through which to apply to spread the deferred VAT will be open from 23 February to 21 June 2021. To avoid interest and penalties being charged on the deferred VAT the business must either use this portal to opt into a payment scheme, or contract HMRC by phone on: 0800 024 1222 by 30 June 2021.
We can’t arrange a VAT payment plan on behalf of our clients as we won’t have authority to agree to make payments from their business bank accounts, so our clients have to take action themselves. However, the good news is that HMRC will allow businesses to arrange a payment plan for deferred VAT even if they have already entered a time to pay arrangement for other taxes.
Before a business can use the online portal to spread their deferred VAT it must have submitted all outstanding VAT returns. It must also have enough cash to pay the first instalment of the VAT immediately, and set up a direct debit to pay the remainder of the debt by monthly payments. Where a direct debit can’t be set up the business owner must call HMRC on 0800 024 1222.
The Government wants all of the deferred VAT paid by 31 January 2022, so the later the business signs up to spread the payments, the fewer instalments will be available to it. For example, if the business joins the scheme by 19 March it can spread the payments over 11 instalments starting in March, but if it joins in June 2021 it can only spread the debt over eight instalments.Written by the Tax Advice Network