The announcement of the VAT Deferral New Payment Scheme will be a relief for many businesses. Here’s a look at what it is and what it means for you and your business.
The pandemic affected most businesses last year. Due to this the UK Government announced a scheme to allow businesses to defer VAT payments. This deferral scheme meant that any payments due between 20th March 2020 and 30th June 2020 could be deferred until 31st March 2021.
Now, HMRC has announced that over half a million businesses who took advantage of these payment deferrals can now join a new scheme that will allow them to pay it back in smaller amounts.
This new scheme is part of a larger support package that the Government is using to help protect millions of jobs and businesses during the pandemic. This package of support is worth over £280 billion and so far, £34 million has been invested into the UK economy. The new payment scheme for VAT deferrals, along with this wider support package will help the UK economy to continue to recover.
To join the new online VAT Deferral New Payment Scheme, businesses will need to have deferred payments from between March 2020 and June 2020 under the original VAT Payment Deferral Scheme. If they do, they will have the opportunity to pay their VAT in equal instalments from March 2021. They will need to opt-in to this new payment scheme and can do so via the online service which opened on 23rd February and will close on 21st June 2021.
How do the instalments for the VAT Deferral New Payment Scheme work?
If you decide to opt-in to the VAT Deferral New Payment scheme, the maximum number of instalments will be determined by the month that you join the scheme. For example, if you join the scheme in March 2021, you will be able to pay your deferred VAT payments in a maximum of 11 instalments. You can view the maximum instalments for each month in the table below:
|If you join by:||Maximum number of instalments available to you:|
|19th March 2021||11|
|21st April 2021||10|
|19th May 2021||9|
|21st June 2021||8|
How do you join the VAT Deferral New Payment Scheme?
To join the scheme, you will need to have a Government Gateway Account. You will also need to submit any outstanding VAT returns from the past 4 years. This step needs to be done otherwise you won’t be able to join the scheme. Errors will also need to be corrected on your VAT returns as soon as possible and you need to make sure that you know exactly how much you owe, including the amount you originally deferred and the amount you have already paid towards it. The deadline to join the scheme is 21st June 2021 and you will be required to pay the first instalment when you join.
What happens if you don’t join the new scheme?
The VAT Deferral New Payment Scheme is one of the options for businesses that still have deferred payments outstanding. The other option is to pay the VAT that you have deferred on or before the 31st March 2021. You can also get in contact with HMRC to discuss extra help that might be available if you need help paying. You would need to do this before 30th June 2021.
It is worth noting that you could be charged interest on your deferred VAT if you either don’t pay your deferred payments in full by 31st March or don’t agree to help from HMRC by 30th June.
If you need any help with your VAT returns or signing up for the VAT Deferral New Payment Scheme, we can help. Our team at Makinson & Co has extensive experience with business accounting and we will do what we can to make the process easier for you.