Back in March 2020 HMRC announced that they would allow business owners to defer VAT payments due between 20 March 2020 and 30 June 2020 to 31 March 2021, as a result of the Coronavirus pandemic. If you have deferred VAT payments then read on.

Many businesses took advantage of the opportunity to defer their VAT payments in order to manage cash flow during a tough year. But as we start 2021 in a continued national lockdown, you may be wondering “what happens if I still can’t pay my VAT by the March 2021 deadline?”. 

We don’t want VAT confusion to be an added worry on your plate. As we’re now approaching the deadline, we want to make sure you understand:

  • How you go about paying the VAT if you can;
  • What you can do if you can’t.

If you were one of those business owners who decided to defer your VAT, there are now three payment options available to you:

  1. Pay in full by the 2021 deadline: If you have the cash available to pay the full amount due, you can make the payment in full anytime now up to 31 March 2021.
  2. Pay in instalments by 2022: If you are unable to pay in full by 31 March 2021, you can opt in to pay the full amount over 11 monthly instalments, interest free. 
  3. Choose your instalments to pay by 2022: If you want to split the full payment into larger chunks, you can select the number of instalments from 2 to 11 equal payments but all instalments must be paid and the balance cleared by 31 March 2022.  

How to opt in to the new deferral scheme for 2022

If you’re not ready to pay the full amount of VAT upfront in March this year, there are a few qualifying conditions for deferring to 2022. 

You must:

  • Still have deferred VAT to pay
  • Be up to date with your VAT returns
  • Opt in by 31 March 2021
  • Pay your first instalment when you opt in to the scheme

If you use the scheme you can still have time-to-pay arrangements in place with HMRC for other debts and outstanding taxes.

In order to use the scheme you must opt in via your Government Gateway account when the scheme goes live. You will need to do this yourself, as your accountant is unable to do it on your behalf. If you don’t have a Government Gateway account, use this link to create one. 

When you opt in you will need to know how much you have deferred and what (if anything) has been paid. You’ll also be required to choose the number of instalments you will pay the balance over.

If you neither have the funds to pay the balance in full or in instalments, you can get in touch with HMRC to discuss your options and request further help to pay. 

We really do recommend you do this as soon as you can, so you get the help you need quickly. We know it can be scary when you don’t think you have the funds to pay, but burying your head will only make the situation worse. It has been a difficult year for so many businesses (not to mention the personal hardships too) and there’s no shame in being upfront about your position. Here’s the HMRC link if you’re having difficulty.