VAT deferment scheme update

12 Feb 2021

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VAT liabilities deferred under the UK government’s VAT deferral scheme (the Covid-19 measure introduced last year) must be paid in full by 31 March 2021 unless taxpayers opt in to pay the deferred liability by instalments. Ever since the Chancellor announced the additional measure of allowing the deferred VAT liability to be paid in instalments, we have been waiting for HM Revenue & Customs (HMRC) to announce further details, which are now being provided.

To take advantage of the instalments opportunity, taxpayers must opt in. This must be done by the taxpayer themselves rather than their agent or another third party on their behalf. Saffery Champness is therefore not able to opt in on behalf of its clients. The opting in process has opened with effect from 23 February 2021 and will close on 21 June 2021. The link to begin the opting in process can be accessed from the link provided below. A government gateway account is required as part of the process. Acceptance by HMRC is dependent on taxpayers:

  • Still having deferred VAT to pay.
  • Being up to date with their VAT returns.
  • Opting in by 21 June 2021.
  • Paying the first instalment when opting in.
  • Paying the remaining instalments by direct debit (although an alternative process is available if payment by direct debit is not possible).

The time when opting in is completed will determine the maximum number of instalments available. The maximum number of instalments is 11 (if opting in is completed before 19 March).

The instalment scheme cannot be used to pay any other VAT liabilities apart from the deferred liability. Specific time to pay arrangements can be discussed with HMRC in respect to any other VAT debts. There are very limited opportunities to include in the deferred balance to be paid in instalments, errors which occurred in the VAT period which was deferred.

HMRC has confirmed taxpayers may be charged interest and penalties if they do not pay the deferred VAT in full by 31 March 2021, and do not then opt into the new scheme by 21 June 2021 or agree extra time to pay arrangements with HMRC by 30 June 2021.

HMRC’s most recent announcement regarding the deferred VAT liabilities is here.

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