Paying VAT deferred from April to June 2020
INTRODUCTION AND CONDITIONS FOR SPREADING PAYMENTS
At the outset of the government response to the Covid-19 pandemic HMRC allowed VAT registered entities to defer payment of VAT falling due in the period from 1 April to 30 June 2020. This covered the normal due dates for returns for periods ending on 29 February 2020, 31 March 2020 and 30 April 2020.
When the deferral was announced it was stated that the deferred VAT would be due by 31 March 2021. Since then an option to spread payments over a number of months was mentioned and this is now available to anyone who hasn't paid this deferred VAT and who meets certain criteria as set out below.
To take advantage of the instalment option you must:
- have your own Government Gateway/HMRC online account (as agents cannot do this via agent logins);
- not have any outstanding (unsubmitted) VAT returns in the last 4 years;
- be up to date with payments on all other VAT returns;
- correct any errors on the deferred VAT return(s) before applying for instalments;
- join by 21 June 2021;
- pay the first instalment when you join; and
- set up a direct debit to pay the remaining instalments.
Note that the direct debit for these instalments will run separately from the direct debit you may already have set up to pay regular VAT returns.
It's also worth noting that these VAT instalments will be INTEREST FREE. This is therefore a good tool to help manage cash flow for the rest of 2021; please make sure that you maintain sufficient resources to meet these payments however, and that you continue to keep regular VAT payments and other taxes up to date.
HOW TO SET UP INSTALMENTS
To take advantage of the instalment option you need to start by clicking the "Join the scheme now" button on this web page Gov.uk VAT Instalments Option (opens in new window).
The process from there should be roughly as follows:
- Review and accept the terms and conditions
- Check that the deferred VAT balance calculated by HMRC agrees to your own records
- Choose the number of instalments (the maximum number is 11 but this will reduce the later you join, as the last instalment will always be due in January 2022)
- Choose the payment date for instalments after the first one (instalment 1 will be collected on sign-up; the others will be collected on the date that you select: i.e. the 1st of every month, the last day of every month, or any chosen day in between)
- Review the schedule of payments set out following stage 4
- Select the account type for the direct debit - business or personal
- Enter your bank details
- Check your bank details
- Confirm your bank details and the setup of the direct debit
- HMRC should then confirm that the direct debit has been set up and that they will send a letter setting out the details
- Finally, the payment summary should be displayed again - please print or save a copy
Please note that as agents we can't carry out this process for you, but if you have any questions about any aspect of this or about cash flow management in general please get in touch via the usual channels.