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VAT Deferral Scheme Due to Coronavirus

The chancellor has announced the introduction of a VAT deferral scheme, allowing businesses to delay payment of VAT between 20 March 2020 and 30 June 2020.

What is the VAT Deferral Scheme?

The VAT deferral scheme was introduced to offer financial support to businesses, struggling with cash flow due to the impact of Covid-19. It was announced in April 2020 and amended on 24 September 2020 to further support businesses.

The scheme permits VAT registered businesses to delay payment of any VAT due between 20 March 2020 and 30 June 2020 until 31 March 2021. So that affects VAT periods ending February 2020, March 2020 and May 2020.

How to Apply for the VAT Deferral Scheme

You don’t need to apply for the scheme if you are planning to pay your VAT by 31 March 2021, you can just withhold your VAT payment. But make sure you:

  • Cancel any direct debits because it’s unlikely you’ll get any refund for accidental payments;
  • File the VAT returns as normal
  • Pay VAT in full on payments due after 30 June

You must pay your VAT in full by 31 March 2021 but you can also make part payments towards the outstanding amount until then.

If You Cannot Pay Your VAT by 31 March 2021

On 24 September 2020, the Chancellor announced that businesses who deferred VAT due from 20 March to 30 June 2020, to give them the option to pay in smaller payments over a longer period of time.

Instead of paying the full amount of VAT deferred by the end of March 2021, businesses can make smaller payments up to the end of March 2022, interest free.

You will need to opt-in to the scheme and discuss this with HMRC to arrange a time to pay. Contact HMRC on 0300 200 3835 to talk about your options and extending your time to pay to the end of March 2022.

Interest and Penalties

You must submit your VAT returns other you’ll risk receiving an assessment from HMRC and you won’t be able to take advantage of the VAT deferral scheme.

HMRC should not charge you interest and penalties on outstanding VAT until 31 March 2021. If you wish to extend your time to pay your deferred VAT then you must contact HMRC to agree on a payment plan and that way you’ll avoid interest and penalties.