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Tax

VAT Deferral Payments Scheme

Many businesses took up HMRC’s offer to defer some, or all the VAT payment due between 20th March and 30th June 2020.

HMRC have now announced that businesses will be given more time to pay.

Payment terms

Originally, any deferred VAT payments due between 20th March and 30th June 2020 were due to be paid to HMRC by 31st March 2021.

HMRC have now given three options to pay this amount-

  1. Pay in full on or before 31st March 2021
  2. Opt into the new VAT deferral payment scheme when it launches early next year
  3. Make a time to pay arrangement with HMRC

Option 2 allows you to settle what you owe over a maximum of eleven monthly instalments. HMRC will not charge any interest over that period.

Conditions

To be eligible for option 2 you must be up to date with your VAT returns and must be able to pay the deferred VAT by Direct Debit.

We will update you on more details on the new VAT deferral payment scheme early 2021 when HMRC announce further details.

Self-Assessment

If you have chosen to defer your second payment on account due to the impact of coronavirus you can still pay your payment on account any time up to 31st January 2021. There will be no interest of penalty so long as you pay in full by that date.

Payment in instalments

You can pay your tax by instalments if you’re unable to pay in full by 31 January 2021. If you file your 2019 to 2020 Self Assessment return early HMRC will know what payments you owe before the 31 January 2021 payment due date.

You’ll then be able to set up a Time to Pay instalment arrangement with HMRC.

If you owe up to £30,000 you can do this online without having to contact HMRC directly.

When we have filed your Tax return, you’ll need to wait at least 48 hours before you can set up your Time to Pay arrangement online.

Late payment penalties are charged when tax remains unpaid 30 days, 6 months and 12 months after its due date for payment. You can avoid them if you enter into a Time to Pay arrangement before they become due and you pay all the tax owing under that arrangement on time.

Interest is payable on Time to Pay instalments. The late payment interest charge from 7th April 2020 is 2.6% for income Tax.

If you are unsure of what Tax you owe by 31st January 2021 please contact the office where a colleague will be able to assist you.

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