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LWA Blog: Get ready to opt-in to the new VAT payment scheme before it’s too late!

If you were affected by the Coronavirus outbreak early last year and decided to defer your VAT payment for the period 20th March to 30th June 2020 as offered by the Government at the time, you may be able to spread owed payments across a further 11 months if you still cannot pay the VAT by the 31st March 2021 deadline.

What is the new payment scheme?

In September 2020 the Chancellor announced that for those businesses struggling to make VAT payments that had been deferred for the period 20th March to 30th June 2020, he would provide an option to make smaller VAT payments over a longer period of time. Further details of this scheme were provided in December and it was confirmed that businesses would need to opt-in by 31st March 2021.

The scheme will allow businesses to:

  • pay deferred VAT in instalments without adding interest
  • select the number of instalments from 2 to 11 equal monthly payments.

By using the scheme, you must ensure the deferred VAT is fully paid by 31st March 2022.

Whilst the scheme is still not open, businesses must do some preparation work beforehand – please see details below.

You must be eligible to use the scheme

In order to use the scheme, allowing you to spread out your deferred payments, you must satisfy the following criteria:

  • create your own Government Gateway account if you don’t already have one.
  • still have deferred VAT to pay:
    • whether this is all or part of your VAT bill for the period 20th March to 30th June 2020
    • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid.
  • be up to date with your VAT returns:
    • you will need to submit any outstanding VAT returns from the last 4 years
    • you should correct any errors on your VAT returns as soon as possible.
  • pay the first instalment before the end of March 2021.
  • be able to pay the deferred VAT by Direct Debit.

Before you use the scheme, it will help if you have worked out the number of equal instalments you’ll need, from 2 to 11 months.

Please note – you must opt-in for the scheme yourself once it opens – your agent (including your accountant) cannot opt-in for you.

What about other VAT periods during the Covid outbreak?

The new payment scheme is only to be used for VAT payments deferred for the period 20th March and 30th June 2020.

If your business has been affected by the pandemic and you are struggling to make payments for any other VAT periods from 1st July onwards, you will need to contact HMRC as soon as you know that you might miss a payment or cannot pay before the deadline.

You can call the Payment Support Service on 0300 200 3835 or visit the Gov.uk website here to find out more.

Whilst LWA cannot opt-in to the scheme on your behalf, our friendly and supportive tax team are here to help if you need advice on any aspect of your corporate or personal tax. Please do not hesitate to contact us via mail@lwaltd.com or call 0161 905 1801 for our team in Manchester or 01925 830 830 to speak to a member of our team in Warrington.