Payment of VAT

COVID 19 News and Updates – UK | Prager Metis | Nov 02, 2020

VAT Payment Deferral – Background
On 20 March the Government announced that VAT payments would be deferred for a period of three months. The deferral:

  • Was available to all UK VAT registered businesses (including non-established taxable persons);
  • Applied to payments due between 20 March 2020 and 30 June 2020 (except for VAT MOSS payments which are not
    covered; and
  • Was automatic, with no application or notification to HMRC required.

VAT payments were not required during the deferral period and businesses were instead required to make payments by 31 March 2021 for any liabilities which accumulated.

Deferred VAT – New Payment Scheme
It has been announced by the Chancellor in his Winter Economy Plan that businesses now have the option of paying the above noted deferred VAT by making 11 equal instalments over 2021-22 as opposed to paying the amount due in full by the end of March 2021.

The practical effect of this is that liabilities for returns for the quarters ended 29 February 2020 (if not already paid by 20 March 2020), 31 March 2020 and 30 April 2020 will not have to be paid until 31 March 2021 at the earliest and this period is extended up to the end of March 2022 if the business opts into the New Payment Scheme.

HMRC will not charge interest or penalties on any amount deferred. VAT refunds and reclaims continue to be processed as normal.

Who is Eligible?
All businesses which took advantage of the VAT deferral can use this New Payment Scheme. However, they will have to opt in, with an opt-in process expected to be put in place in early 2021.

Useful links
Deferral of VAT Payments Due to Coronavirus (UK.GOV)