Deferred VAT Portal Opens This Week

The online portal to apply to spread VAT deferred from the first 2020 lockdown will be open from 23 February 2021.

HM Revenue and Customs (“HMRC”) allowed all VAT registered businesses to defer their VAT payments due to be paid in the period from 20 March to 30 June 2020.

No interest or penalties have been charged on that outstanding VAT debt, and businesses have been free to pay the amount due at any time.

HMRC had indicated that businesses would be required to pay the VAT debt in full by 31 March 2021. However, businesses now have the chance to pay this by instalments until January 2022.

HMRC is asking businesses to pay their VAT debts in full by 31 March 2021 if they can. Where the cash is not available the business must contact HMRC to arrange a payment plan to spread the payment of the debt over up to 11 instalments ending in January 2022.

If the business joins the scheme by 19 March it can spread the payments over 11 instalments starting in March 2021, but if it joins the scheme in June 2021 it can only spread the debt over eight instalments. In all cases payment must be completed by 31 January 2022.

If a business does not join this scheme to formally defer the remaining VAT debt, HMRC will impose penalties for late payment and possibly initiate debt collection action against the business.

Conditions 

Before a business can use this new VAT deferral scheme it needs to:

• submit all its outstanding VAT returns for the last four years;
• correct any errors on past VAT returns;
• know how much VAT was deferred;
• know how much of that deferred VAT debt is still outstanding; and
• have enough cash ready to pay the first instalment of the VAT due immediately.

The business owner/ director must have the authority to set up a direct debit to pay the remainder of the debt by monthly payments.

The good news is HMRC will allow businesses to arrange a payment plan for the deferred VAT even if they have already entered a time to pay arrangement for other taxes.

Using the Online Portal to arrange a Payment Plan

To smooth the procedure of agreeing a payment arrangement, HMRC is introducing an automated process accessed through an online portal. This will open on 23 February and remain open until 21 June 2021.

The company director or business owner must access this portal themselves; we cannot do this on your behalf as part of the payment plan the business must set up a direct debit to make regular payments from their business bank account. .

If the business owner can’t use the online portal, they should call HMRC on 0800 024 1222 to arrange a payment plan, and this telephone service will be open until 30 June 2021.

Where a direct debit can’t be set up, perhaps because there is no UK bank account, or the account has two signatories, the business owner must call HMRC on 0800 024 1222.

If the business doesn’t have the cash to even pay the first instalment of VAT, the owner should contact the HMRC payment support service on 0300 200 3835.