Repaying VAT deferred during the first lockdown

HMRC have published an update about the process for repaying VAT deferred by businesses during the first COVID lockdown. 

If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:

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

VAT payment scheme

There will be an opportunity to opt into a scheme where a taxpayer can make up to 11 monthly instalments, interest free, with all instalments required to be paid by the end of March 2022. A business can select the number of instalments from 2 to 11 equal monthly payments.

To opt into the scheme you must:

  • Still have deferred VAT to pay 
  • Be up to date with your VAT returns 
  • Join by 21 June 2021 
  • Pay the first instalment when you join
  • Be able to pay the deferred VAT by Direct Debit 

The online opt in process will be available in early 2021. You must opt in yourself, an agent cannot do this for you.

If you opt in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax. In addition, businesses must submit any outstanding VAT returns from the last 4 years. Access to the scheme may be blocked for those with outstanding returns. If any corrections need to be made to the returns on which VAT was deferred, HMRC warn that corrections received after 31 December 2020 may not show in the deferred VAT balance.

For more information on the process visit the Gov.UK website page: Pay VAT deferred due to Coronavirus (COVID-19)

Contact the tax team at Carpenter Box for further information or advice.