In the early days of the coronavirus pandemic, the government gave a helping hand to businesses by allowing them to defer their VAT payments. As a result, thousands of firms and self-employed people deferred VAT payments due between 20 March and 30 June 2020.

If you deferred VAT payments last year, you now need to make arrangements to pay them. To do this, you have two options. These are:

  • Pay the deferred VAT in full by 31st March 2021. If you do this, you do not have to pay penalties or interest. You don’t need to contact HMRC.
  • You can join the VAT deferral new payment scheme.

If you need to join the payment scheme, read on to learn how to enrol and find out how it works. Please note that you have to join the scheme yourself – THP or any other accountant cannot do this for you.

When does the deferred VAT payment scheme open?

The new payment scheme opens today, 23rd February. You can join it at any time between then and 21st June 2021. However, if you join later you will have to pay fewer and larger instalments.

However, please note that if you are on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, HMRC will invite you to join the new payment scheme during March.

What does the scheme offer? 

If you join the new payment scheme, you can pay your deferred VAT in equal instalments. You can choose to split payments between 2 to 11 instalments, depending on when you join.

How do I join the scheme?

As we mentioned, you have to join the scheme yourself. You can do this online.

To enrol in the scheme online, you must:

  • Still owe HMRC deferred VAT
  • Have up-to-date VAT returns – you must submit any outstanding VAT returns from the last 4 years and correct any errors.
  • Know how much you owe, how much you deferred, and how much you’ve already paid
  • Pay the first instalment when you join
  • Pay instalments by Direct Debit.

If you cannot use the online service, you need to call the COVID-19 helpline on 0800 024 1222 after the scheme opens on 22nd February. An adviser should be able to help you join.

How many instalments can I choose to pay?

The earlier you join, the more instalments you can choose. If you join by 19th March, you can spread payment over up to 11 instalments. Join by 21st April and you can opt for up to ten. Leave it until 19th May and the maximum is nine. By the closing date on 21st June, the ceiling is lowered to only eight instalments.

I still can’t pay my deferred VAT. What do I do?

If you still can’t pay your deferred VAT, you need to get in touch with HMRC as soon as possible. You may be able to set up a Time to Pay Arrangement. To do this, call the Payment Support Service on 0300 200 3835 between 8am and 6pm, Mondays to Fridays.

Can THP help me?

You have to join the deferred VAT payment scheme yourself. However, if you are a THP client who doesn’t yet use our VAT services, we can help you make sure your accounts are in order before you sign up to the payment scheme. If you need us to complete any outstanding VAT returns or correct any for errors, please speak to your account manager.

Avatar for Kirsty Demeza
About Kirsty Demeza

With a portfolio that ranges from startups to companies with a £10 million turnover, Kirsty’s talent for working closely with her clients ensures her services remain in strong demand.

“The most rewarding part of my role is seeing clients succeed,” she says. “When you help a new business and watch it expand into new premises and secure big contracts, it’s a great feeling.” Kirsty never finds two days are the same.

As well as providing accounting services that range from self-assessment tax planning and VAT to audit and accounts, she’s part of THP’s sales team and closely involved in helping our trainees to develop their skills.

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