VAT deferral scheme open for business

Businesses that took the option to defer the payment of their VAT liabilities between 20 March 2020 and 30 June 2020 need to decide what course of action they will take. 

There are two options available for repaying this VAT. The first option is to pay the deferred VAT in full on or before 31 March 2021. No interest or penalties will accrue on deferred payments that are paid by the new due date and there is no requirement to contact HMRC.

The second option is to further defer the amount of VAT due. The VAT deferral new payment scheme will allow businesses the option to pay the deferred VAT in smaller payments over a longer period, interest free. Instead of having to repay the full amount by 31 March 2021, businesses can make smaller interest-free payments during the 2021-22 financial year and thus, pay the VAT due by 31 March 2022. 

The VAT deferral new payment scheme is now open for applications and will remain so up to and including 21 June 2021. The maximum number of instalments allowed under the scheme is based on the date businesses sign up to the scheme. The first instalment must be paid on joining the scheme.

 
This means that businesses need to sign up by 19 March 2021 to benefit from the maximum number of instalments. Businesses must also meet certain conditions to use the scheme including being up to date with their VAT returns. The deferral scheme has also now opened (from 10 March 2021) to businesses using the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme.