Back the beginning of the COVID-19 pandemic, the government decided to give VAT-registered businesses a helping hand. As a result, HMRC automatically deferred VAT payments that were due between 20th March and 30th June 2020. At first, businesses that deferred were given until 31st March 2021 to pay. Then HMRC launched a repayment scheme, giving firms the opportunity to defer their payments for longer. If you have opted for deferred VAT payment, it’s important to know that you may need to act before 21st June.
Deferred VAT payment options
If you deferred VAT last year, the ideal scenario is to repay the VAT you owe in full. However, for many businesses that’s still not a realistic option.
In these cases, you have two main choices. Most importantly – as long as you act before 21st June – you can opt into HMRC’s VAT repayment scheme.
The scheme has been open for a while. If you joined by 19th March, you would have been able to repay VAT over 11 instalments. Anyone joining before 21st June can repay what they owe over 8 instalments.
You can find more details about the scheme here. To join, you need your VAT registration number and a Government Gateway account. You also need to make sure you have submitted any outstanding VAT returns over the last 4 years. In addition, you have to correct any errors on your VAT returns.
You’ll also need to pay the first instalment when you join and set up a direct debit. If you can’t do that, read on for an alternative repayment option.
If you do decide to join the VAT deferral repayment scheme, please note that you will have to do this yourself. Your agent or accountant cannot do this for you – meaning THP is not allowed to do this for our clients.
Another VAT repayment option
If you can’t join the official repayment scheme (maybe because you can’t afford to pay over as few as 8 instalments), you may still be able to avoid penalties. To do this, you must get in touch with HMRC and agree your own repayment plan. Please do this before 30th June or you will be hit with penalties.
What are the non-payment penalties?
If you haven’t opted into the repayment scheme or made your own arrangements with HMRC, you will be charged 5% of the outstanding deferred VAT. This can be a big hit if you owe a significant amount of VAT.
Can THP help me with deferred VAT?
We will happily help both old and new THP clients in any way we can. Although we can’t register you for the VAT deferral repayment scheme, we can certainly make sure your VAT returns are up to date and compliant. Also, if you need help working out a repayment plan that you can propose to HMRC, we can certainly assist. Simply get in touch with your account manager or, if you’d like to learn more about becoming a THP client please fill in the form below.
About Karen Jones
Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.
With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.
Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”
Karen’s specialist skills:
- Personal Taxation
- Tax Efficient Planning
- Trust Administration