As part of its range of measures to help businesses battle the effects of the coronavirus pandemic, in March of last year the Government announced a VAT deferral scheme that would allow VAT payments due between 20 March and 30 June 2020 to be deferred until 31 March this year.
This initiative is commonly referred to as the VAR deferral scheme and a large number of businesses took advantage of the opportunity to boost cashflow and safeguard the short-term future of their business during such a disrupted period.
But firms must now begin to pay back deferred VAT.
In this blog post, we will discuss the options available, how to sign up and what the repayment process looks like in practice.
When are deferred VAT payments due?
HMRC announced later in 2020 that deferred payments could be spread throughout 2021, with businesses, the economy and the nation at large continuing to roll with the punches of Covid-19, and the impact that three national lockdowns have had on trade.
Joining the VAT deferral payment scheme
You will not be automatically enrolled in the new VAT deferral scheme and must notify HMRC of your intentions. Click here to access the relevant section on the HMRC web platform and follow the step-by-step guide to sign up.
Make sure you have your Government Gateway details to hand and other relevant information related to your business’s tax affairs. Be sure to spend a little time familiarising yourself with the terms and conditions of the deferral scheme before you push the button to progress.
You will then be given a choice regarding the number of instalments you wish to pay. This will default to the highest number of smallest instalments, but you can refine this should you wish to make the amounts bigger and pay everything back more quickly.
The instalment options will reduce the longer you wait to set up your plan.
Setting up a VAT deferral repayment plan
You can also choose the date on which you’d like repayments to be collected, allowing you to generate your own repayment plan, which you can review and make changes to before choosing to proceed.
At the next stage, you will be required to input your bank account details and set up a Direct Debit agreement, which you can once again review. We strongly recommend that you print a digital PDF of this page to your desktop, or even run off and file a physical copy for future reference.
Paying back VAT deferral early
If you are in a stronger financial position than you expected, then you may choose to pay off your deferred VAT before the deadline of 31 March 2021. Of course, time is quickly running out for you to do this, but if you do clear the amount owed by the deadline then it is not necessary to notify HMRC, as you will not need to set up a repayment plan.
Is interest charged of deferred VAT?
No. The Government has confirmed that interest will not be charged on deferred VAT.
Deadline for VAT deferral repayments
The first deadline, which allowed payments to be split across 11 instalments, passed on 19 March this year. The final deadline for you to set up your business’s plan is 21 June, but we recommend getting set up as soon as possible in order to access a fuller range of instalment options.
What if my business can’t make the repayments?
If you are concerned that you may not be able to make VAT deferral payments then you should contact HMRC as soon as possible. This includes if you need to change, rearrange or cancel a repayment plan that you have previously set up.
What help is available?
Relative Accountancy will work with your business to secure a favourable VAT deferral payment plan, and make plans to ensure the business comes out of the other side in a healthy position. We can also provide support with existing payment plan arrangements and are proud to have supported dozens of businesses throughout the pandemic.
Relative Accountancy is here to help if you need advice. We have a proven track record of supporting businesses and their ambitions.
Call 01484 441431 or email hello@itsrelative.co.uk.