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Insights United Kingdom: Budget Spring 2021 – Managing cash with interest free instalments on VAT deferrals

United Kingdom: Budget Spring 2021 – Managing cash with interest free instalments on VAT deferrals

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published on 11 May 2021 | reading time approx. 1 minute

 

In their continued support for businesses, HMRC have announced an interest free instalment period to all those who took part in VAT liability deferrals between 20 March and 30 June 2020. 

 

 

Applications for the ‘VAT Deferral New Payment Scheme’ must be completed online through the HMRC Portal which will enable businesses to pay their deferred VAT in instalments by direct debit. 

Businesses can opt into the New Payment Scheme in March, April, May or June but the later you opt in, the fewer instalments that will be available. 

The opt-in date must be sufficiently early in the month to allow the first payment to have reached HMRC by the end of that month:

Month of opting-inFirst payment by end ofMaximum subsequent equal monthly instalments
MarchMarch10 (11 in total)
AprilApril9 (10 in total)
MayMay8 (9 in total)
JuneJune7 (8 in total)

 

Businesses can pay in fewer instalments but a minimum of 2 instalments are required.

 

Businesses can still pay the full deferred amount by 31 March 2021 or contact HMRC to arrange an alternative method of payment.

 

A penalty of 5 per cent may apply in the event any deferred VAT liability remains outstanding, unless:

  • businesses have not paid in full,
  • opted into the New Payment Scheme or
  • made an alternative arrangement to pay by 30 June 2021.


The usual Default Surcharge penalty scheme will not apply to the deferred VAT portion.

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