Up to half a million businesses who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
On 24 September 2020, the Chancellor announced that businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period.
Instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free.
You will need to opt-in to the scheme.
For those who do choose to opt in, this means that your VAT liabilities due between 20 March and 30 June 2020 do not need to be paid in full until the end of March 2022. Details of how you will need to opt in have not yet been released.
Those that can pay their deferred VAT can still do so by 31 March 2021.
If you are still unable to pay the VAT due and need more time, see the guidance about what to do if you cannot pay your tax bill on time.
More information on the scheme will be available in the coming months.
What you need to do
If you have cancelled your Direct Debit to HMRC to take advantage of the deferral, you will need to set up a new Direct Debit arrangement in time for the first payment after 30 June.
Payments due after 30 June must be paid in full as normal and you must continue to file your VAT return on time.
Paying the tax that you have deferred
If you chose to defer your VAT payment as a result of coronavirus, you must pay the VAT on or before 31 March 2021.
You can pay or make payments towards your deferred VAT now or at any time up to 31 March 2021.
Please get in touch with us if you need assistance in managing your accounting during this time.