Deferred VAT: beware of the June 2021 deadline for payment (or Time to Pay arrangement)

Did you defer a VAT payment in the period 20 March 2020 to 30 June 2020? If so, you have until 21 June 2021 to pay the full amount, or put in place a Time to Pay arrangement.

(Read more about Time to Pay as a way to delay your Corporation Tax liabilities or PAYE/ NIC payments here).

If the online service is not appropriate, you have until the 30 June 2021 to speak to HMRC. Failing to contact HMRC by these deadlines is likely to result in a late payment penalty. The arrangements announced by HMRC in February allow you to pay your deferred VAT in interest free instalments and the number of instalments can be anything from 2 to 11 months.

The weakness to the scheme is that your accountant cannot undertake this project for you. The business owner must deal with the application. There is no write off of the VAT so the full amount of deferral will have to be paid and one of the conditions will be that you have historically paid your VAT on time. The first instalment will have to be paid when you join and all instalments will have to be by direct debit. If you wish to make use of the maximum period you must register for the Time to Pay arrangement by 19 March, that is with the first payment paid before that date. So those who wish to maximise the period of 11 months should do so now.

Unfortunately, as advised above, the position is that you, as the busines owner, will have to create your own Government Gateway account if you don’t already have one, and submit any outstanding VAT returns – it’s a key issue that without all returns submitted you will not be able to join the scheme. If there are any errors that you are aware of you should also deal with them prior to notifying the Revenue via the Gateway that you wish to have a Time to Pay arrangement. It is critical also that you do know exactly how much you owe so that you can progress matters with HMRC. The alternative to this is, if you are a business who would prefer your accountant to be involved, or indeed seek a period more than 11 months, then you should contact a tax adviser to discuss the next steps that need to be done.

If you are a DTE client, please contact your partner at DTE to arrange for a member of the tax team to liaise with you on the best way in which to proceed with regards to settlement of arrears. If you are not a DTE client and would like to discuss your specific situation, please get in touch with , and one of our advisers will get back to you as soon as we can.