TAX BASICS

How To Join The New VAT Deferral Payment Scheme?

The pandemic has struck the world and has had a massive impact on the economy. Therefore the government had announced that the VAT payments can be deferred. This is part of the government package of support worth more than £280bn. A business that had deferred VAT between 20 March 2020 and 30 June 2020 can now make the payment in installments. Let’s take a look at how to join the new vat deferral payment scheme of HMRC in detail.

How to make the VAT deferral payments?

Before we discuss how to join the new scheme here are the current options to make payments.

  • pay the deferred VAT in full, on or before 31 March 2021
  • The online service is open between 23 February 2021 and 21 June 2021 to join the new VAT deferral payment scheme.
  • Contact HMRC on Telephone: 0800 024 1222 by 30 June 2021 for any extra help needed to pay.

What is the benefit to join the new VAT deferral payment scheme?

The new scheme has been open from February 23rd and will remain the same till June 21. Anyone on the VAT Annual Accounting Scheme or VAT Payment on Account Scheme can join the scheme from March 10, 2021.

The major benefit offered by the new scheme is the ability to make the payments in equal installments. Moreover, offer support to the business by not charging any interest.

Installment options for the VAT deferral payment scheme?

The new scheme allows paying the VAT without any interest in equal installments. Therefore, it allows businesses to make smaller payments. However, all installments must be paid by the end of March 2022. Also, the initial installment must be paid at the time of joining and then in the succeeding months.

The number of months available for a business to make the payments is set on the date they join the scheme. If you join the scheme on 19 March 2021 then you receive 11 months to make the payment. The table below shows the HMRC’s deadlines and the number of installments available. Businesses can also opt to pay off much earlier.

If you join byNumber of instalments available to you
19 March 202111
21 April 202110
19 May 20219
21 June 20218

How to join the Vat Deferral Payment Scheme?

The online sign-up for the scheme is now open until 21 June 2021. Whereas, anyone on the VAT Annual Accounting Scheme or VAT Payment on Account Scheme can only join the scheme from March 10, 2021.

Hence, businesses can register by signing in through the government gateway. The scheme requires direct debit and therefore business must register themselves and agents can’t do it on their behalf.

What are the requirements?

  • The business must have its own government gateway account or create one.
  • You must submit any outstanding VAT returns of the past 4 years.
  • Ensure your VAT returns are correct and accurate.
  • You must know the amount you owe, how much was deferred, and how much was paid.
  • Must have deferred VAT to Pay.
  • Must also be ready to make the first installment.

If your business is not able to use the online service you can contact the COVID-19 helpline at 0800 024 1222. Such circumstances may arise when there is a lack of a UK bank account, cant pay direct debit or if there is dual signatories in the account.

How to correct errors on VAT returns for the VAT deferral period

The VAT deferral scheme covers accounting periods from February 2020 until May 2020. However, in May it’s only for payment on account customers and certain non-standard tax periods.

If you find an error on a VAT return for the above period that is covered by the scheme then you must:

  • Fill in Form VAT652 – It is used to inform the HMRC of any errors on previous VAT returns that are over the current reporting threshold.
  • Send it to the VAT correction team.

What are the adjustments that can be made?

When you have made a miss on previous VAT returns you can adjust the errors in the below situations:

  • Below the reporting threshold.
  • Not intentional.
  • For an accounting period that ended less than 4 years ago.

Any other errors must be informed to the HMRC using the VAT652 form.

What is the reporting threshold?
  • If the net value of the errors is £10,000 or less then you can adjust in your next return.
  • If the error amount is 1% of the box 6 figure up to £50,000.

Deferring extra payments resulting from error corrections.

Firstly the HMRC must have processed your correction. Then you must also receive a statement of account confirming the balance.

Once the above has occured you can then contact the COVID-19 helpline (Telephone: 0800 024 1222) to defer extra payments from error corrections.

You cannot include any extra payments once you have joined the new scheme. Also, any error correction for the deferral period that is notified after March 31st cannot be deferred.

You can pay the extra payment by any of the following ways:

  • You can include the payment in the deferred balance account and then pay it in full by 31 March 2021.
  • Join the new scheme while it’s open and include the amount in the deferred balance account.

For any further help regarding payment you can contact HMRC on Telephone: 0800 024 1222.

Sidharth Bharthan Menon
CEO, taxtotal​