How to Handle Deferred VAT Payments?
The COVID-19 crisis has impacted many businesses since its first outbreak back in March of 2020. The good thing is that the UK government was prompt enough to offer a VAT deferral payment scheme to help business through a difficult economic period. As such, businesses were allowed to defer their VAT payments due between the 20th of March and the 30th of June 2020 and make a payment until the 31st of March, 2021.
Now that this deferred VAT payment scheme is about to expire, the good news is that the UK government has extended this scheme until the end of January 2022. In this article, we’ll share with you how to handle your deferred VAT payments.
Three options for deferred VAT payments
If you’ve taken the VAT deferral payment scheme offered last year, you now have three options to take, as follows:
- You can settle the deferred VAT payment in full on or before the 31st of March, 2021.
- You can opt for the VAT deferral’s new payment scheme between the 23rd of February and the 21st of June 2021.
- You may need to contact HMRC at 0800 024 1222 by the 30th of June if you need extra help to pay.
Opting in to the VAT deferral new payment scheme
The VAT deferral’s new payment scheme is merely an extension of last year since many businesses have not gotten back on track due to the on-going COVID-19 crisis. All deferred VAT payments can be extended and must be settled by the end of January 2022, meaning that you don’t have to pay the full amount by the end of this March. At the same time, keep in mind that the new scheme is available from the 23rd of February to the 21st of June, this year.
What it involves: This new scheme will allow your business to:
- Pay deferred VAT in instalments without adding interest
- Choose the number of instalments from two to eleven equal monthly payments
What the eligibility requirements are: If you want to take advantage of this scheme, your business must:
- Still have deferred VAT payments
- Be updated with the VAT return declarations
- Enrol in the scheme by the 21st of June, 2021
- Pay the first instalment when you join
- Pay the deferred VAT instalments by Direct Debit. If unable to do so via this option, you can call the COVID-19 helpline (0800 024 1222)
How to opt in for the new payment scheme: To opt in for this new scheme, you must:
- Create a Government Gateway account
- File any outstanding VAT returns from the last four years
- Correct any errors on submitted VAT returns immediately
- Ensure the amount owed is known (including the original deferred amount and what has been settled so far)
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At this point, you now know how to handle deferred VAT payments for your business. Be sure to consider all the valuable information discussed above so that you can join the new payment scheme. We hope this article has shed some light on what you need to know and what you need to do with your deferred VAT payments!
Are you looking for accounting services for small businesses? You’ve come to the right place! We’re an accountancy firm based in the UK catering to small businesses and freelancers. If you need someone to help you handle your VAT payment deferral, get in touch with us to schedule a free consultation.