Businesses that deferred VAT payments last year can join the new scheme to pay it in smaller monthly instalments.

The VAT Deferral New Payment Scheme was announced by the Chancellor in the Winter Economy Plan. Over half a million businesses have deferred their VAT payments.

The businesses that deferred VAT payments last year can now join the new online VAT Deferral New Payment Scheme to pay it in smaller monthly instalments, HMRC announced today (23 February 2021). The scheme will provide businesses with the breathing space they may need to manage their cashflows in the weeks and months ahead.

The scheme is open to businesses that deferred VAT due from 20 March to 30 June 2020 (under the VAT Payment Deferral Scheme) and still have payments to make. They will now be given the option to pay their deferred VAT in equal consecutive monthly instalments from March 2021.

Businesses will need to opt-in to the VAT Deferral New Payment Scheme. They can do this via the online service that opens on 23 February 2021 and closes on 21 June 2021. You can find details of what businesses must do before they opt-in.

Businesses can can pay your deferred VAT in 2 to 11 consecutive instalments starting in March, April, May or June 2021, without adding interest.

They can:

  • pay the deferred VAT in full, on or before 31 March 2021
  • opt-in to the VAT Deferral New Payment Scheme online between 23 February and 21 June 2021
  • contact HMRC by 30 June 2021 if they need to agree extra help to pay

Payments can easily be set up through the new payment scheme portal. Those joining online are able to set up direct debit payments. The joining date is slightly longer for those unable to use our online services due to the way payments are processed.

Since the VAT Deferral New Payment scheme will require a direct debit to be set up as part of the digital opt-in process, this must be done by the authorised bank account holder. Because of that, HMRC is unable to provide an agent service for the scheme.

The new payment scheme is part of a wider government package of support, worth more than £280 billion, which is helping to protect millions of jobs and businesses. So far, around £34 billion has been injected into the UK economy following the half a million businesses that deferred their VAT payment last year.

Eligible businesses that are unable to use our online services can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme until 30 June 2021.

If you need extra help to pay and have not contacted HMRC by 30 June 2021, you may be charged interest or a penalty.

More information is available about the VAT Deferral New Payment Scheme, including further detail for people who are unable to opt-in online and what to do if you are a Payment on Account or an Annual Accounting customer.

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Linda Casey has over 10 year work experience in accounting and covers UK news on audit, accounting and taxation.


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