VAT Deferral Scheme – the reality!

Coronavirus, VAT,

The COVID VAT Deferral Scheme was launched recently to help businesses who are yet to pay VAT that was deferred between 20th March 2020 and 30th June 2020.

Business owners now have three options to deal with any amounts that remain outstanding. These are:

  • Pay the deferred VAT in full on or before the 31st March 2021.
  • Join the new VAT Deferral Payment Scheme using the online registration process (see below) between 23rd February and 21st June 2021.
  • Contact HMRC on 0800 024 1222 by 30th June if you need extra time to pay.

If you join the scheme in March 2021, you can spread your VAT over 11 instalments, but this reduces as each month passes, reducing to just 8 instalments if you join before the 21st June. The total amount of VAT must be paid by March 2022.

There is an online application process for the scheme, but we’re hearing reports that it’s not particularly effective!

Several clients have tried to apply using the online link, to be told that their VAT Returns are not up to date, one of the criteria for the scheme. In each case, this has been incorrect, and all Returns have been submitted and all except the payments due within the deferral period have been made.

Various people that clients have spoken to at HMRC have confirmed that records have been up to date, nothing is overdue for payment, but that they cannot resolve the problem.

If you are yet to apply for the Deferral Scheme, our strong recommendation would be to call HMRC on 0800 024 1222 to apply by phone.

This is likely to be both far faster, and less stressful, though be prepared to hold for a while to get through.

As a reminder, you must meet the following criteria:

  • You must be up to date with your VAT returns.
  • You must join the scheme yourself; we cannot do this for you.
  • The scheme closes to new members on 21 June 2021.
  • You must pay the first instalment when you join.
  • You have to pay instalments by direct debit (you’ll need to set this up as part of the application call).
  • If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.

Thanks to those who’ve let us know their experiences; it’s been really helpful throughout the pandemic so please do keep us up to date!