VAT Deferrals – What can you do now if you still have not got the funds to pay?Posted: Mar 10, 2021

Believe it or not, it has been almost 12 months since businesses in the UK were first given an answer to the question ‘what happens if I cannot pay my VAT because of the pandemic’? It seems odd to think that exactly one year ago I was on a train travelling down to London for a conference. The following day I had a full itinerary of Networking events, coffee, catch-ups, and other plans for what we then considered the usual bustle of working life. It felt like just another couple of days that I would probably have half-forgotten by now if it wasn’t for the fact that within a week my calendar emptied of all events and shortly afterwards we entered the first lockdown.

Very quickly after the lockdown announcement, the Government released various schemes to help businesses. One of the options they released was to defer any VAT payments due between 20 March 2020 and 30 June 2020 and allow payment by 31 March 2021. Many businesses took this option because of the uncertainty at the time, but now another decision needs to be made. The Government has offered further help and so your options are as follows;

·        Pay the deferred VAT in full by 31 March 2021.

·        Opt into the new payment scheme by 21 June 2021

·        Agree extra help to pay with HMRC by 30 June 2021. To do this you will need to contact HMRC on 0800 024 1222

If you do not follow any of the above, you may be charged interest or a penalty.

What is the new VAT deferral payment scheme?

The new scheme allows you to;

·        Pay our deferred VAT in equal instalments, interest free

·        Choose the number of instalments, from 2 to 11 (depending on when you join)

The following table set 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 available to you

19 March 2021                            11
21 April 2021                              10
19 May 2021                               9
21 June 2021                               8
 

Before joining, you must:

·        Create your own Government Gateway account (if you don’t already have one). It can take some time to set one up so you need to act quickly if you need one.

·        Submit any outstanding VAT returns from the last 4 years, otherwise, you can’t join the scheme. You must be up to date with your returns.

·        Correct errors on your VAT returns (if you have any)

·        Make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid.

·        Pay the first instalments when you join the scheme.

·        Pay your instalments by direct debit.

What happens if you not in a position to pay the sum due.

As mentioned above, you can speak to HMRC if you need extra time to pay your VAT and or other HMRC debts. You will need to understand what you can offer and over what period and we encourage you to be realistic and clear about your offer.

If you do not think this is a viable option now is the time to consider taking advice. This may be your accountant, business advisor or coach or alternatively, you should consider talking to an Insolvency practitioner.

Our initial meetings are free of charge, confidential and we will talk you through the options so if you feel you need us, call. We are here to help where we can.