Deferred VAT Payments: what you need to know

About the Covid-19 VAT Payment Deferral Scheme

The Covid-19 VAT payment deferral scheme was introduced by the UK government and Her Majesty's Revenue and Customs service (HMRC) as part of the Budget 2020. The aim of the scheme was to act as a measure to assist business owners who were struggling due to the financial impact of the Covid-19 pandemic. 

The scheme applied to Value Added Tax (VAT) payments due for the period between 20 March, 2020, and 30 June, 2020. Under the Covid-19 VAT payment deferral scheme, business owners were allowed to defer these VAT payments until 31 March, 2021. 

The Covid-19 VAT payment deferral scheme was declared closed as of 30 June, 2020, with all payments due by 30 June, 2021. This VAT deferral payment date was then extended to January 2022. However, a business owner must have applied for consecutive monthly instalments. 

What to Do if You Deferred VAT Payments

Any business owner that chose to defer their VAT payments from 20 March, 2020, and 30 June, 2020, was able to make these payments later than usual. The deferral was automatic for all VAT-registered businesses, so business owners had to need to apply for it. 

HMRC announced that they would not charge any interest or impose penalties on any VAT amount that was deferred because of the scheme. It should be noted that businesses and self-employed people were still required to submit invoices via VAT returns on a monthly or quarterly basis as usual. 

To avoid any unnecessary stress or penalties, business owners were advised to cancel any automatic VAT direct debit systems with their bank. 

If you chose to defer VAT payments, you had three options:

• To pay the deferred VAT amount in full, on or before 31 March, 2021
• To pay in 11 consecutive monthly instalments via the VAT Deferral New Payment Scheme
• Businesses that required further assistance in paying were advised to contact HMRC by 30 June, 2021

How to Pay Deferred VAT Payments In Full

Any business owner who chose to pay their deferred VAT payments in full simply had to do so in the normal manner by 31 March, 2021. Once the payment was made to HMRC, it had to be recorded and matched to any unpaid VAT returns. The amount due to HMRC by a business owner depended on the number of deferred VAT payments. 

How to Pay Deferred VAT Payments In Instalments

If a business owner was having trouble making their deferred VAT payments in full by 31 March, 2021, they were able to register under the VAT Deferral New Payment Scheme and arrange for payments to be made in instalments. This was a service operated online by HMRC from 23 February, 2021, to June 21, 2021. 

If a business owner decided to opt into the VAT Deferral New Payment Scheme, they could then arrange to have their outstanding VAT debt paid in instalments. Business owners could choose to arrange for anywhere from two to 11 consecutive monthly instalments paid via a direct debit arrangement. The instalments could start in March, April, May or June of 2021 and attracted no interest or penalties. 

What If You Didn’t Make Your Deferred Payments on Time?

If you failed to make your payments by the deferral date, or you did not opt into the VAT Deferral New Payment Scheme, the HMRC could impose a 5% penalty charge or could impose interest on any outstanding VAT amounts. Any business that did not arrange for instalments or pay in full would have likely incurred these penalties. 

Conclusion

Keeping track of VAT payments isn’t easy. Many business owners would rather spend their time running their businesses rather than looking after their books. Luckily, you can take advantage of the services offered by Mooncard to help you keep your accounting in order. Mooncard specialises in helping business owners to simplify their accounting processes and keep track of their expenses. Get in touch online to book a no-obligation, free demonstration from Mooncard.