Keeping in view the COVID-19 pandemic atrocities and cash-flow pressure off the businesses, the UK government announced to defer VAT payments. To support the business through the prevalent times, around £33.5bn of VAT payments were deferred between March 20, 2020, and June 30, 2020.
Businesses were initially given till last March 31, 2021, to pay the amassed liabilities as they were not asked to pay (deferred VAT) through hard times. Seeing the worsening conditions of businesses, the government showed leniency and introduced an improvised scheme by extending the date of registration to June 21, 2021, along with an installment plan. The HMRC Chief Executive said;
“Businesses that deferred paying their VAT last spring have until June 21 to join the VAT Deferral New Payment Scheme online. They should act now to avoid missing out on this opportunity to spread the payment of their deferred VAT across monthly, interest-free installments.”
Your choices for repayment?
- Sign up for the new scheme (the last date to apply is June 21, 2021)
- Pay the deferred amount in full
- Ask HMRC for an extension ( ask by June 30, 2021)
How does the new scheme work?
In order to get benefits from the new payment scheme, applications were opened in February 2021 and will close on June 21, 2021. If you are planning to join the scheme, then you should have the following;
- Up-to-date VAT returns
- Direct debit payment setup
What are the possible penalties?
According to clause 99 and schedule, 19 of the Finance Bill 2021 penalty of five percent of the deferred VAT outstanding is set if the business has not registered for the new payment scheme, paid full, or made an elective plan to pay by June 30, 2021.
“The default overcharge rules for late-paid VAT don’t matter to deferred balances.”
Regardless of the conditions of the first deferral scheme, payment must be made in full by March 31, 2021, and the business owners have to pay the deferred balance until June 30, 2021. And if they are having difficulties in paying on time, they should better get help from HMRC.
UK government helped you get through the pandemic, and now it’s up to you to pay back. If you have concerns regarding the VAT deferral scheme, you can ask us to help you understand more regarding the new scheme.
How can I spread my deferred VAT payments? (2021, June 3). Retrieved from TheTimes.co.uk: https://www.thetimes.co.uk/article/how-can-i-spread-my-deferred-vat-payments-9qtm9jtzq
Press Release: One month left to join VAT Deferral New Payment Scheme. (2021, May 20). Retrieved from Gov.Uk: https://www.gov.uk/government/news/one-month-left-to-join-vat-deferral-new-payment-scheme
UK Tax Quarterly Update – May 2021. (2021, May 24). Retrieved from gibsondunn.com: https://www.gibsondunn.com/uk-tax-quarterly-update-may-2021/
VAT Deferral – Coronavirus. (n.d.). Retrieved from Britishchambers.org.uk: https://www.britishchambers.org.uk/media/get/VAT%20Deferral%20re%20Covid-19.pdf
VAT payment deferrals for business – how does it work and how do I take advantage of it? (2020, April 15). Retrieved from Closebrothers.com: https://www.closebrothers.com/vat-payment-deferrals-business-how-does-it-work-and-how-do-i-take-advantage-it
When to pay VAT which was deferred due to COVID-19. (2021, April 03). Retrieved from crowe.com: https://www.crowe.com/uk/insights/vat-deferral-payment