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 condition.

Updated 26 February 2021.

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

•    Pay in full on or before 31 March 2021
•    Opt into the new payment scheme between 23 February 2021 and 21 June 2021
•    Make a ‘time to pay’ arrangement with HMRC by calling them on 0800 024 1222 by 30 June 2021

Interest/penalties may be charged if these three options are not taken up and there is a debt on file.  

The new scheme

The VAT deferral new payment scheme is now open until 21 June 2021, you must opt in yourself; your agent cannot do this for you. However, at Gerald Edelman, we can join the scheme on our clients’ behalf if we have access to their online account.  Any prior debts must be paid up beforehand.

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

The payment instalments are as follows –

If you join by    Number of instalments available to you:   
19 March 2021 11
21 April 2021 10
19 May 2021 9
21 June 2021 8


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 before the end of March 2021
  • 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
  • consider the number of equal instalments you’ll need, from 2 to 11 months.

The scheme is now open and you must be ready to pay the first instalment when you sign up.

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

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