How to repay deferred VAT due to COVID19

by | Mar 1, 2021 | VAT

Back at the beginning of the pandemic, the government offered a lifeline to VAT registered businesses that were worried for the future of their cash flow. They did this by creating the deferred VAT scheme – automatically deferring VAT payments for thousands of businesses.

These payments were originally due between 20th March and 30th June 2020, but this deferral came with the proviso that they would need to be paid at some point.

That point is now fast approaching, and it’ll be a relief to many businesses that they’re offering a staggered repayment option rather than clawing it back in one fail swoop.

But, how do you make sure you’re allowed to do this?

This blog will explain all!

How do I repay the deferred VAT I’ve held back?

You’ve got two options here:

Repay in full before the deadline – 31 March 2021, or

Opt into the new VAT deferral payment scheme.

Deferred VAT scheme

If repaying in full, it’s simple. You just need to make a payment to the HMRC by the deadline (31 March 2021) for the full amount using the HMRC’s VAT account details.

If you choose to make use of the VAT deferral payment scheme, you need to have joined it by the 19th March 2021 to have the longest time frame to repay, but you can join the scheme at any time up to 21st June 2021.

These are the deadlines for direct debit repayment (to allow time for the direct debit to be set up in time).

If you join by: Number of Instalments:
19th March 2021 11
21st April 2021 10
19th May 2021 9
21st June 2021 8

 

But, and it’s a big BUT here, there are some terms and conditions to this scheme that you need to be aware of. 

Who can use this scheme?

To be able to use this scheme, you must:

  • still have deferred VAT to repay
  • be up to date with all your VAT returns – this means they all need to be submitted (and none still outstanding that are late)
  • join by the 21st June 2021
  • pay the first instalment when you join
  • be able to pay the deferred VAT by Direct Debit.

It’s worth noting here that you still apply for the scheme if you have a ‘time to pay’ arrangement for any other taxes with the HMRC.

How do I access the scheme?

If you want to use this scheme, there is a few things you need to do before applying:

  • Make sure you have a government gateway log account. These are the credentials you use to log into the HMRC website. If you’ve not signed up for an online VAT account using these credentials, you can do so when you log in by clicking ‘add a tax to your account’ like the image below:

Screenshot 2021 02 26 at 14.49.06

  • Submit any outstanding returns from the last 4 years.
  • Make sure you know how much you owe, and if you’ve already paid some of it back
  • Consider how many instalments you’ll need – the number available to you will depend on when you join the scheme (you can choose less instalments than what is being offered).

It’s important to note that, because these payments need to be set up via a direct debit, you are required to set this up yourselves and we’re not allowed to do it on your behalf. 

Join the VAT deferral scheme

What to do if you still can’t repay

If your business has struggled and you’re not in a position to be able to repay using this scheme, you can get in contact with the HMRC’s ‘Time to Pay’ team and arrange a repayment schedule that works better for you.

Our team is ready to talk to you about your business.
We’d love to help you get back to doing what you love! If you’d like to know how we can help, click the button to get started.