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Paying your deferred VAT

Posted on 12th February 2021

If you deferred your VAT payments between 20 March and 30 June 2020 and still have payments to make you can join the VAT deferral new payment scheme.

Your options for deferred VAT payments

you can pay the deferred VAT in full on or before 31 March 2021

you can join the VAT deferral new payment scheme until 21 June 2021

contact HMRC by 30 June 2021 if you need extra help to pay.

If you don’t do one of these three things you could be charged interest or a penalty.

VAT deferral new payment scheme

If you’re on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you’ll be invited to join the new payment scheme in March.

You will then be able to pay your deferred VAT in equal interest free instalments, and choose the number of instalments, from two to 11.

The month you join the scheme will set the maximum number of instalments for your payments.

So, if you join the scheme in March, you’ll be able to pay your deferred VAT in 11 or fewer instalments. If you join in April the maximum number of instalments will be 10.

There’s a deadline in roughly the middle of each month for joining the scheme until June to allow for Direct Debit processing.

If, for any reason, you can’t pay by Direct Debit you can contact the covid-19 helpline on 0800 024 1222.

How to join the scheme

If you don’t already have one, you will need to create and activate a Government Gateway account to join the new scheme.

You must submit any outstanding VAT returns from the last four years and correct any errors on your VAT returns as soon as possible.

You will need to know how much you owe, including the amount you originally deferred and anything you have already paid

The first instalment will be payable when you join the scheme.

If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.

Correcting errors on VAT returns in the deferral period

The accounting periods for February, March, and April 2020 are included in the VAT deferral period.

If you are part of the payment on account scheme and for some non-standard tax periods, May 2020 might also be included.

If you realise there’s an error on a VAT return during this period you will need to complete a form to tell HMRC.

Deferring error correction payments

If errors mean you will have to pay more, you can contact the HMRC covid-19 helpline when your error correction has been processed and you have received your statement confirming your new balance.

You can pay your revised deferred balance in full by 31 March or include the extra amount in your deferred balance when you join the new payment scheme. You won’t be able to include extra payments after you’ve joined the scheme.

If you haven’t told HMRC about the errors affecting the deferral period before 31 March 2021 you won’t be able to include them in your deferred payments.