In response to COVID-19 HMRC confirmed that all payments of VAT to HMRC due between 20 March 2020 and 30 June 2020 could be deferred until 31 March 2021, to help businesses manage their cash flow.
It was announced in the Winter Economy Plan that the Government would give businesses which deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-2022. Rather than paying in full at the end of March 2021 (as originally planned), businesses would be able to choose to make 11 equal instalments over 2021-22.
HMRC has confirmed that you may be charged a 5% penalty or interest if you do not pay in full or make an arrangement to pay by 30 June 2021.
HMRC has now published updated guidance with instructions on how to repay deferred VAT:
Pay VAT deferred due to coronavirus (COVID-19)
Find out how to pay VAT payments deferred between 20 March and 30 June 2020. You can pay now or get ready to join the VAT deferral new payment scheme.
If you deferred VAT payments due between 20 March and 30 June 2020 and still have payments to make, you can:
- pay the deferred VAT in full, on or before 31 March 2021
- join the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021
- contact HMRC on Telephone: 0800 024 1222 by 30 June if you need extra help to pay
You may be charged interest or a penalty if you do not:
- pay the deferred VAT in full by 31 March 2021
- opt into the new payment scheme by 21 June 2021
- agree extra help to pay with HMRC by 30 June 2021
Pay your deferred VAT
You can pay your deferred VAT in full by 31 March 2021.
You do not need to contact HMRC.
If you want to join the new scheme
The VAT deferral new payment scheme will be open from 23 February up to and including 21 June 2021.
If you’re on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you’ll be invited to join the new payment scheme later in March 2021.
The new scheme lets you:
- pay your deferred VAT in equal instalments, interest free
- choose the number of instalments, from 2 to 11 (depending on when you join)
To use the online service, you must:
- join the scheme yourself, your agent cannot do this for you
- still have deferred VAT to pay
- be up to date with your VAT returns
- join by 21 June 2021
- pay the first instalment when you join
- pay your instalments by Direct Debit (if want to use the scheme but cannot pay by Direct Debit, there’s an alternative entry route for you)
If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.
Instalment options available to you
The month you decide to join the scheme will determine the maximum number of instalments that are available to you. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer.
The table below sets out the monthly joining deadlines (to allow for Direct Debit processing) and the corresponding number of maximum instalments (including the first payment):
|If you join by:
||Number of instalments available to you:
|19 March 2021
|21 April 2021
|19 May 2021
|21 June 2021
Before you join the scheme
Before joining, you must:
- create your own Government Gateway account (if you do not already have one)
- submit any outstanding VAT returns from the last 4 years – otherwise you’ll not be able to join the scheme
- correct errors on your VAT returns as soon as possible
- make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
If you cannot use the online service
There may be circumstances where you cannot use the online service, for example if you:
- do not have a UK bank account
- cannot pay by Direct Debit
- have dual signatories on your account
If you want to join the new payment scheme, but cannot use the online service, contact the COVID-19 helpline when the scheme opens on Telephone: 0800 024 1222. An adviser will help you join.
Correcting errors on VAT returns for the VAT deferral period
The VAT deferral period covered accounting periods for:
- February 2020
- March 2020
- April 2020
- May 2020 – for payment on account customers and certain non-standard tax periods only, in addition to the above periods
If you notice an error on a VAT return which relates to a period covered by the scheme, you should:
- Fill in form VAT652.
- Send it to the VAT Error Correction Team.
If you want to defer extra payments resulting from error corrections, contact the COVID-19 helpline (Telephone: 0800 024 1222) after both of the following have happened:
- HMRC have processed your error correction
- you’ve received a statement of account confirming the balance
You can then either:
- include the payments in your deferred balance and pay in full by 31 March 2021
- include the payments in your deferred balance and join the new payment scheme while it is open
- contact HMRC if you need more help to pay on Telephone: 0800 024 1222
You cannot include extra payments after you’ve joined the scheme. Any error correction relating to the deferral period that is notified to HMRC after 31 March 2021, cannot be deferred.
You may be contacted by HMRC if we’ve carried out a VAT compliance check and found that extra payments are due for the deferral period. You must also contact our COVID-19 helpline (Telephone: 0800 024 1222) if you want to defer these payments.
If you’re not able to pay your deferred VAT
If you’re still unable to pay and need more time, find out what to do if you cannot pay your tax bill on time.
To find what other support is available, use the Get help and support for your business guide.