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VAT Deferral New Payment Scheme

Find out how to pay VAT payments deferred between 20 March and 30 June 2020. You can pay now or join the VAT deferral new payment scheme.
Join the VAT deferral new payment scheme

To take advantage of the instalments opportunity, taxpayers must opt in. This must be done by the taxpayer themselves rather than their agent or another third party on their behalf. Accountancy Cloud cannot opt in. The opting in process will open on 23 February 2021 and will close on 21 June 2021.

The government has since introduced the ability for businesses to spread the payment (or at least some of it) until January 2022.

The new scheme lets you:

  • pay your deferred VAT in equal instalments, interest free
  • choose the number of instalments, from 2 to 11 (depending on when you join)

If you don’t have the cash (which let’s face it, is a likely scenario for many businesses at the moment), you must contact HMRC to arrange a payment plan, which could see your liability being spread over up to 11 instalments.

Time to pay arrangements don't automatically apply - failure to join the scheme to formally spread your payment means that HMRC will treat this as an ordinary overdue debt, and will impose penalties for late payment, and possibly initiate debt collection action.

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Getting online

To help ease the process of setting up your time to pay arrangement, HMRC has introduced a new online portal, which will be going live on 23 February. It will stay open until 21 June, so make sure you’ve got your plan in place.

If you’re struggling to access the online portal, you should contact HMRC on 0800 024 1222. This telephone support service will remain open until 30 June.

Conditions you need to know

As you’d expect, there are certain conditions that you will need to meet in order to be eligible for the VAT deferral scheme.

  • Businesses must be up to date with their VAT returns.
  • Opt in by 21 June 2021.
  • Pay the first instalment when opting in.
  • Pay the remaining instalments by direct debit (although an alternative process is available if payment by direct debit is not possible).

If a direct debit can’t be set up because, for example, the bank account has two signatories, or the business doesn’t have a UK bank account, then you can contact HMRC on 0800 024 1222.

Likewise, if the business doesn’t have sufficient cash available to pay the first instalment, the person of authority should contact the HMRC payment support service on 0300 200 3835.

Act now

We'd recommend you to sign up by the 19th March providing you meet the conditions above to help ease cashflow. HMRC has set an aim to have collected all of the deferred VAT by 31 January 2022, so the earlier businesses sign up to the spread payment scheme, the more instalments will be available. For more guidance check out visit the HMRC website.

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