Service: VAT

Topic: Coronavirus

Extension of VAT Deferral Scheme

By Richard Staunton

15 Feb 2021

HMRC is giving businesses who deferred their VAT payment additional time to pay due to the continued difficult trading conditions.

Updated 25 May 2021.

Originally, you had to pay the deferred VAT in full by 31 March 2021 now, the options are:

  • Opt into the new deferral scheme by 21 June 2021
  • Make a ‘time to pay’ arrangement with HMRC by 30 June 2021
  • Pay in full on or before 30 June 2021

The new scheme

The new scheme launched in February 2021 and the online portal opened in March 2021. It will close on 21 June 2021. 

Instead of paying the full amount by the end of June 2021, you can make 8 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.

If you do not pay the full amount or opt into the payment plan, you may be charged a 5% penalty.

To use this scheme, you must:

  • still have deferred VAT to pay
  • be up to date with your VAT returns
  • opt in before the 21 June 2021 
  • pay the first instalment when you join
  • be able to pay the deferred VAT by Direct Debit.

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

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 any 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.

You should also:

  • pay what you can as soon as possible to allow HMRC to show the correct deferred VAT balance. 

If you have any queries speak to a specialist, contact our VAT accountants.

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