As part of the new measures to support businesses during the pandemic, in the Government announced that certain VAT payments could be deferred. Qualifying businesses were not required to make VAT payments during the deferral period. Instead, they were initially given until 31st March 2021 to pay any liabilities which accumulated.
On 24th September 2020, the Chancellor Rishi Sunak announced that rather than paying in full at the end of March 2021, businesses would be able to pay over up to 11 instalments. Online sign up for the new payment scheme opens on 23rd February and closes on 21st June 2021.
The VAT deferral new payment scheme
Instead of paying the full amount deferred by the end of March 2021, the new payment scheme allows businesses to make smaller monthly instalments, interest free. Businesses can select the number of monthly instalments they wish to make (up to a maximum of eleven) but all instalments must be paid by the end of March 2022.
Paying deferred VAT in instalments
- The first instalment is payable at the time of joining the scheme, and subsequent instalments have to be made in consecutive months.
- The maximum number of instalments available to a business will be determined by when they join the scheme.
- Businesses can choose to pay in fewer instalments than the maximum set out in the table below.
- HMRC’s guidance includes the following table setting out the deadlines for joining (to allow for Direct Debit processing) and the corresponding number of maximum instalments available (including the first payment):
|Join the scheme by:||Maximum number |
of instalments available
|19 March 2021||11|
|21 April 2021||10|
|19 May 2021||9|
|21 June 2021||8|
How to sign up for the new payment scheme
- Online sign up for the new payment scheme will be available from 23rd February to 21st June 2021.
- Businesses on the VAT Annual Accounting Scheme or Payment on Account Scheme will be invited to join later in March 2021.
- In order to join the scheme, businesses have to be up to date with their VAT returns and be able to pay by direct debit.
As the scheme requires a direct debit to be set up, businesses must opt in themselves and agents cannot do this on their behalf.
Before opting in
Before you opt-in to the scheme, you’ll need to complete the following steps:
- Create your own Government Gateway account if you don’t already have one;
- Submit any outstanding VAT returns from the last four years;
- Correct errors on your VAT returns as soon as possible (corrections received after 31st December 2020 may not show in the deferred VAT balance);
- Decide the number of equal instalments you wish to make;
- Make sure you know how much you owe, including the amount originally deferred and how much you have already paid; and
- Be ready to make your first instalment payment.
If you want to join the new payment scheme, but cannot use the online service you’ll need to contact the COVID-19 helpline when the scheme opens on 0800 024 1222.