Options for paying back your deferred VAT bill (and what to do if you’re not ready)

If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you have some choices as to how to clear the amount you owe.

You can:

• Pay the deferred VAT in full on or before 31 March 2021
• Opt into the new VAT deferral payment scheme when it launches on 23 February
• Contact HMRC if you need more help to pay

If you wish, you can pay your deferred VAT in full in one payment by 31 March 2021 using your normal payment method. You do not need to contact HMRC if you choose this route.

The new online opt in process is available from 23 February. Only business owners will be able to opt in – i.e. your accountant or tax agent won’t be able to do it for you. The new scheme will enable you to make up to 11 monthly instalments, interest free to clear your deferred amount by the end of March 2022 which may well be attractive from a cash management perspective.

The scheme will allow you to:

• Pay your deferred VAT in instalments without adding interest
• Select the number of instalments from 2 to 11 equal monthly payments

To use this scheme you must still have deferred VAT to pay, be up to date with your VAT returns, opt in before the end of March 2021 and, pay the first instalment when you opt in.

If you opt into the scheme, you can still have time to make pay arrangement for other HMRC debts and outstanding tax.

Getting ready to opt into the new payment scheme

There are a number of things you need to do before you will be able to opt in:

• Create your own Government Gateway account if you don’t already have one
• Submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
• Correct any errors on your VAT returns as soon as possible
• Make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
• Consider the number of equal instalments you’ll need, from 2 to 11 months

If you are unable to pay and need more time, you should contact HMRC to discuss your options.

If you need any help setting up your payment or would like to speak to a Business Advisor about your options please contact us.

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