Covid VAT deferral payment guidance updated

HMRC has updated guidance on how to register for the online service to pay VAT payments deferred between 20 March and 30 June 2020 due to the covid-19 pandemic

For those companies that still have VAT payments outstanding, there are a number of payment options with online registration open until 21 June 2021.

These include paying the deferred VAT in full, on or before 31 March 2021; joining the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021; or contacting HMRC by phone on 0800 024 1222 by 30 June if you need extra help to pay.

Interest or a penalty may be charged if you do not pay the deferred VAT in full by 31 March 2021, opt into the new payment scheme by 21 June 2021 or agree extra help to pay with HMRC by 30 June 2021.

Deferred VAT can be paid in full by 31 March 2021 if an instalment option is not taken.

Joining the new scheme

The VAT deferral new payment scheme will be open from 23 February up to and including 21 June 2021.

Anyone on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme will be invited to join the new payment scheme later in March 2021.

The new scheme lets you pay your deferred VAT in equal instalments, interest free; and choose the number of instalments, from two to 11 (depending on when you join).

It is important to note that in order to use the online service, businesses and sole traders registered for VAT must:

• join the scheme yourself, your agent or accountant cannot do this for you;
• still have deferred VAT to pay;
• be up to date with your VAT returns;
• join by 21 June 2021;
• pay the first instalment when you join; and
• pay instalments by direct debit (if want to use the scheme but cannot pay by direct debit, there’s an alternative entry route for you).

If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.

Instalment options

The month you decide to join the scheme will determine the maximum number of instalments that are available. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer.

The table below sets out the monthly joining deadlines (to allow for direct debit processing) and the corresponding number of maximum instalments (including the first payment):

If you join by: Number of instalments

19 March 2021 11

21 April 2021 10

19 May 2021 9

21 June 2021 8

Before you join the scheme

Before joining, you must create your own Government Gateway account (if you do not already have one); submit any outstanding VAT returns from the last four years – otherwise you’ll not be able to join the scheme; correct errors on your VAT returns as soon as possible; and make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid.

If you cannot use the online service

There may be circumstances where you cannot use the online service, for example if you:

• do not have a UK bank account;
• cannot pay by direct debit; or
• have dual signatories on your account.

If you want to join the new payment scheme, but cannot use the online service, contact the Covid-19 helpline when the scheme opens on 0800 024 1222. An adviser will help you join.

Correcting errors on VAT returns for the VAT deferral period

The VAT deferral period covered accounting periods for:

• February 2020
• March 2020
• April 2020
• May 2020 – for payment on account customers and certain non-standard tax periods only, in addition to the above periods.

If you notice an error on a VAT return which relates to a period covered by the scheme, you should fill in form VAT652 and send it to the VAT Error Correction Team.

Deferring extra payments resulting from error corrections

If you want to defer extra payments resulting from error corrections, contact the Covid-19 helpline (Tel: 0800 024 1222) after both of the following have happened:

• HMRC has processed your error correction; and
• you’ve received a statement of account confirming the balance.

You can then either:

include the payments in your deferred balance and pay in full by 31 March 2021;

• include the payments in your deferred balance and join the new payment scheme while it is open; or
• contact HMRC if you need more help to pay on tel: 0800 024 1222

Businesses cannot include extra payments after they have joined the scheme. Any error correction relating to the deferral period that is notified to HMRC after 31 March 2021, cannot be deferred.

You may be contacted by HMRC if the tax authority has carried out a VAT compliance check and found that extra payments are due for the deferral period.