Deferred VAT can now be paid back in equal instalments from March this year up to January 2022 with between 2-11 instalments available. Previous guidance had suggested the extension would be to 31 March 2022, however the application process appears to preclude this, with 28 January 2022 appearing to be the latest payment date available, regardless of payment option chosen.
When choosing to apply, the choice is therefore between starting payments earlier and spreading these over a longer instalment plan with smaller periodic payments, or delaying the first payment until later, and then paying larger periodic instalment amounts over a shorter instalment plan.
The extension is optional, not automatic, so must be applied for. Whilst businesses are free to repay the deferred VAT in full by the end of March this year, many will want to avail themselves of this interest-free instalment option. Applicants should make sure their VAT compliance is up to date, as this may affect their eligibility for the scheme (see criteria below).
Opting in will not affect a taxpayer’s ability to agree, or continue, other time to pay arrangements with HMRC. Whilst this deferment extension is generous, HMRC recognise it will not be enough for some businesses and are therefore encouraging these businesses to get in touch before 30 June, to discuss other time to pay options. We have already seen HMRC agreeing longer instalment plans for such businesses, but these need to be negotiated directly with HMRC on a case-by-case basis.
Please note that interest or penalties can apply if no action is taken. To avoid these taxpayers should either:
a) pay the deferred VAT in full by 31 March 2021;
b) opt into the extension scheme by 21 June 2021; or
c) agree extra help to pay with HMRC by 30 June 2021.
The below table details the application cut-off dates:
Whilst agents cannot make the application on your behalf (only taxpayers may apply) you may wish to discuss the application with your adviser, particularly if you have outstanding compliance issues, as these may affect your eligibility.
It is unclear whether HMRC will query applications, but they have stipulated the following requirements to date for an application to be eligible:
The following suggested actions can help to prepare the application in advance:
VAT Assistant Manager