Were you one of the half a million businesses that deferred VAT payments last year? As one of their business support measures during the pandemic, HMRC allowed over £34 billion in VAT payments to be deferred, but businesses now need to start paying that back.
If your business deferred VAT payments due between 20 March 2020 and 30 June 2020 you can:
- pay the deferred VAT you owe in full now or
- join the VAT deferral new payment scheme – the online service is open between 23 February 2021 and 21 June 2021 or
- contact HMRC on 0800 024 1222 by 30 June 2021 if you need extra help to pay
How do I pay my VAT in monthly instalments?
If you signed up last year to defer your 2020 VAT payments, you now have less than a month left to join the HMRC VAT deferral scheme online if you want to spread the cost by paying in monthly instalments.
The March, April and May joining dates have passed, but businesses can still spread their payments across up to eight equal monthly instalments, interest-free, if they join by 21 June 2021. Payments can be set up on the VAT Deferral New Payment Scheme portal.
Eligible businesses that are unable to access HMRC's online service can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme (until 30 June 2021). Businesses should also contact HMRC by 30 June 2021 if they need to agree extra help to pay.
What happens if I elected to defer VAT payments last year but don’t pay up?
Businesses may be charged a 5% penalty and/or interest if they don't:
- join the scheme by 21 June or
- pay in full by 30 June or
- contact HMRC to make arrangements to pay by 30 June 2021.
How many businesses have chosen to defer payments?
HMRC data to 30 April 2021 reveals that 228,850 businesses that deferred their VAT last year have already paid their VAT in full. This, along with instalments already made under the new payment scheme and other payment plans, totals £15.1 billion. Since the online service opened on 23 February 2021 another £11.5 billion has already been committed to future instalment payments by 134,627 businesses.
Other Covid support actions by HMRC that businesses need to be aware of
Businesses are also being are warned to prepare for COVID support audits by HMRC, who are looking into the legitimacy of support grants, loans and furlough claimed during the coronavirus pandemic.
Chancellor Rishi Sunak gave HMRC new powers last year to investigate businesses that may have made false claims for furlough or grant payments. In the case of furlough, HMRC is able to reclaim 100% of any funds incorrectly or fraudulently claimed.
Whilst some businesses may have intentionally claimed for grants and loans they were not entitled to, there may be others who took decisions under pressure at a time when the economy was looking less certain – so if you have any doubts then it may be worth talking to a financial adviser now to get some specialist advice.