Any business that deferred their VAT payments which were due between 20 March and 30 June 2020 as a result of the Coronavirus pandemic, will now need to consider how they will repay this outstanding tax.
They can choose from the following options in order to do this:
- Pay the deferred VAT in full by 31 March 2021;
- Join the VAT Deferral New Payment Scheme (VDNPS); or
- Contact HM Revenue & Customs (HMRC) to arrange for an extension to payment dates to 30 June 2021.
The VDNP Scheme will be open between 23 February and 21 June 2021 and is aimed to provide businesses with the option to pay deferred VAT in equal interest-free instalments.
Firms will be given the option to make between 2 – 11 instalments, depending on their individual circumstances, which will include when the business joins the scheme.
Businesses that are already on the VAT Annual Accounting Scheme, or the VAT Payment on Account Scheme, will be invited to join the VDNPS in March 2021.
Other businesses wishing to use the scheme will need to apply to HMRC online. To use the online service, they must:
- Join the scheme themselves – agents cannot directly assist them;
- Still have deferred VAT to pay;
- Be up to date with their VAT return filings;
- Pay the first instalment when they join; and
- Pay instalments by Direct Debit (there are alternative payment methods for those without access to Direct Debit on request).
Before joining, businesses must:
- Obtain a Government Gateway account – if they do not already have one;
- Submit any outstanding VAT returns from the last four years;
- Correct any errors on VAT returns as soon as possible; and
- Make sure they know how much they owe, including the amount originally deferred and how much you may have already paid.
If a business decides to opt-in to the New Payment Scheme it will not affect its ability to request a Time to Pay arrangement from HMRC for other debts and outstanding tax payments in future.
Businesses who are unable to use the scheme or that need extra help repaying deferred tax must call HMRC on 0800 024 1222 by 30 June 2021.
Businesses may be charged interest or a penalty if they do not pay the deferred VAT in full, or opt-in to the VDNPS, or seek additional help to repay deferred VAT by the deadlines outlined above.