Covid 19 – Paying your deferred VAT liability by instalments

If you recall, businesses were able to defer their VAT liability payment for the period 20 March 2020 to 30 June 2020, to 31 March 2021.

However, if you anticipate that your business might struggle to pay the deferred VAT liability by 31 March 2021, you might be able to agree a payment plan with HMRC to spread the VAT liability payment over 11 monthly instalments, with the final monthly payments to be made in March 2022, interest free.

The number of monthly instalments over which the deferred VAT liability might be paid depends on when an agreement is reached with HMRC. Therefore:

If agreement reached by            Number of instalments 

19 March 2021                                      11

21 April 2021                                         10

19 May 2021                                         9

21 June 2021                                        8         

Paying the deferred VAT liability in instalments is not automatic and businesses will need to opt in/agree a payment plan with HMRC by latest 21 June 2021.

Unless a payment plan is agreed with HMRC, the deferred VAT liability will need to be paid by 31 March 2021 to avoid a late payment penalty and/or interest.

To agree the deferred VAT liability payment plan, businesses will need to ensure that:

•  All outstanding VAT returns have been filed;

• Errors identified on VAT returns, covering the deferred VAT periods, have been notified to HMRC as soon as possible so that, if required, you could ask HMRC to include any resulting additional VAT liability payment in the payment plan, by 31 March 2021; and

• The first deferred VAT instalment payment is made at the time of agreeing the payment plan.

Finally, should you wish to have a chat about the above, please contact us at enquiries@alexandrwalker.com or on 02081919867.