At the beginning of the Covid-19 pandemic, the government opted to defer all VAT that was due to be paid to HMRC between the 20th March and 30th June 2020. Usually, there would have been a direct debit to collect this VAT; however, this was not activated by HMRC, which also meant that no interest or late payment surcharges were charged. It has now been confirmed that this will now begin to be charged again.
To avoid interest starting to accumulate at 2.6% on the VAT now due, you must have either paid the total deferred amount by 31st March 2021 or agree to pay HMRC month instalments, ensuring that all VAT is paid off by the 31st January 2022.
How To Set Up Your VAT Payment Plan
It is straightforward to arrange a payment plan with HMRC, and we recommend using their online portal, which will remain open until the 21st June 2021. This can be accessed using your Government Gateway ID, and you will need to ensure that all of your outstanding VAT returns for the past four years have been submitted. If you do not have a Government Gateway account, you can set this up as part of the process.
The earlier you set up the payment plan, the more instalments you will have to spread the cost. It is important to keep in mind that you must be ready to pay off the first instalment immediately, and you will need to set up your direct debit to cover the remaining monthly payments. If you do not have the authority on your own to set up a direct debit, you must call HMRC on 0800 024 1222.
At Digital Tax Matters, we are not able to set up these VAT instalments on your behalf as we cannot agree to payments from your business bank account; however, we can advise you on the best route for your company. Even if you have already entered a time to pay arrangement for other taxes, HMRC will still allow you to set up a new plan for your VAT payments.