Paying back COVID deferred VAT - scheme now closed

Update 1/7/21

HMRC has updated guidance stating that the deferment of VAT deferral payment scheme is now closed.

Update 20/05/21

HMRC have issued a guide reminding business that there is One month left to join VAT Deferral New Payment Scheme.  Businesses that deferred VAT payments last year have until 21 June 2021 to join the new online payment scheme to spread the cost of their deferred VAT.

Update 14/04/21

Information has been added to Pay VAT deferred due to coronavirus (COVID-19) on penalties or interest that may be charged if businesses do not pay the deferred VAT  in full or make an arrangement to pay.  The guidance states that a 5% penalty or interest will be charged if you do not pay in full or make an arrangement to pay by 30 June 2021.

Update 20/01/21

The guidance re opting into the deferred VAT new payment scheme still says:

You cannot opt in yet. The online opt in process will be available in early 2021. You must opt in yourself, your agent cannot do this for you.

However, HMRC have now added a further section to theri guidance regarding errors that have arisen during the VAT payment deferal periods: Correcting errors on your VAT returns relating to the VAT payments deferral scheme. If you want to include error amounts or assessed amounts in the deferred VAT figure, you need to contact HMRC by 29 January 2021.

Including extra payments in the VAT deferral new payment scheme

You must contact our COVID-19 helpline by 29 January 2021 if you want to include extra payments in the new scheme resulting from:

• confirmed error corrections
• a HMRC VAT assessment

You may not be able to include extra error correction payments if you have not received your Statement of Account by 29 January 2021.

You cannot include extra payments after you have opted in. You will need to pay this to HMRC by 31 March 2021.

Update 23/11/20

Further to the summary below, HMRC have now issued Pay VAT deferred due to coronavirus (COVID-19) which explains how the opt-in scheme can be accessed in 2021

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David Millar from HMRC joined the ORCA Law conference today. He gave an overview of the system that is being planned to pay back VAT that was deferred between March and June 2020.

At the moment this is the system that is being proposed – please note that this may change and no guidance has yet been issued by HMRC:

• Deferred VAT remains payable by 31 March 2021 unless the taxpayer opts in for the new payment scheme OR agrees a time to pay agreement with HMRC. 
• Tax payers can choose to pay the liability by 31 March 2021 in one lump sum
• The new payment scheme will be a simple digital enrolment scheme available in Feb/Mar 2021
• To use it taxpayers need to opt in before 31 March 2021, otherwise the full liability become due on 1 April 2021 and HMRC will then collect it as any other debt
• The taxpayer will have to pay 1/12^th of its liability by DD at the time of application
• The remaining liability will be split across 11 equal DD payments
• Taxpayers will be eligible to use this scheme provided that they have deferred tax, intend to settle the liability by DD and have no outstanding VAT returns for the last 4 years as at 6 February 2021
• If using this scheme no interest will be payable
• Taxpayers still have the option to agree time to pay arrangements with HMRC at anytime, in which case interest may be payable (depending on what is agreed)

There are a couple of points to note that may be more applicable to university subsidiaries than universities – although in practice it will be interesting to see how HMRC manage these;

• The liability remains with the legal entity NOT the VAT registration number, so if an entity joins a VAT group, the deferred VAT liability does not become a “joint and several” liability of the VAT group – it remains with the legal entity
• If a business deregisters for VAT it can still use the scheme