Companies now have less than one month left to join the VAT Deferral New Payment Scheme.
The deadline to join the scheme on 21 June has prompted HM Revenue & Customs (HMRC) to issue a fresh warning to businesses that haven’t already joined the scheme, that they face a five per cent penalty if they do not make some form of payment arrangements next month.
Last year, more than half a million businesses deferred VAT payments in response to COVID-19, after the Government announced a three-month deferral for the first tax quarter of 2020.
Companies that deferred VAT payments due between 20 March 2020 and 30 June 2020 were given the choice earlier this year to pay the deferred VAT in full by 31 March, set up a payment plan under the VAT Deferral New Payment Scheme by 21 June or make other suitable arrangements with HMRC by 30 June.
The VAT Deferral Payment Scheme allows taxpayers to schedule payments monthly. The scheme lets business owners pay their deferred VAT in equal instalments, interest-free and choose the number of instalments by direct debit, from two to 11 (depending on when they joined the scheme).
For example, if a business joined by 19 May 2021, they can now pay nine equal instalments, whereas if they join on 21 June 2021, they will make eight instalments, or fewer should they wish to pay the deferred VAT quicker.
To benefit from the scheme, HMRC says businesses must:
- Join the scheme on their own – an agent cannot do this on their behalf
- Still have deferred VAT to pay
- Be up to date with VAT returns, including correcting any previous errors
- Join by 21 June 2021
- Pay the first instalment when joining
- Pay instalments by Direct Debit, where possible (alternative payment methods are available on request).
The new payment scheme is part of a wider Government package of support, now worth more than £400 billion, which is helping to protect millions of jobs and businesses during the pandemic.
The new payment scheme will continue to help the economy recover by enabling businesses, impacted by the pandemic, to manage their cash flow at this critical time.
Eligible businesses that are unable to use the online service can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme or make alternative arrangements to pay until 30 June 2021.