VAT Deferral Scheme

Does the VAT deferral scheme apply to payments on account or just quarterly payments?

All VAT payments, apart from import VAT and VAT MOSS, have been deferred by three months from 20 March 2020 until 30 June 2020. During this period, businesses will not need to make VAT payments to HM Revenue & Customs (HMRC).

In most cases businesses will have until 31 March 2020 to pay any liabilities that have accumulated during this period.

However, in the Winter Economy Statement on 24 September 2020, the Chancellor announced the option for businesses to opt-in to pay the deferred VAT in 11 equal interest-free instalments in the 2021-22 tax year.

The deferral was automatic and businesses did not need to apply to be able to benefit from it.

Can I still reclaim VAT during this period?

HMRC will continue to process VAT reclaims and refunds for this period.

I didn’t cancel my direct debit. Can I get a refund?

Taxpayers that wished to defer VAT payments, but did not cancel their Direct Debits in time can claim a refund, according to HM Revenue & Customs (HMRC).

The tax authority has confirmed that taxpayers that intended to defer VAT payments due between 20 March 2020 and 30 June 2020 that were unable to cancel their Direct Debit to HMRC could now do so.

To obtain a refund, taxpayers should submit a Direct Debit Indemnity Claim to their bank. On this submission, all they must state is that they want to claim a refund under the Direct Debit Indemnity Scheme (DDI) and HMRC has said it will honour the request.

HMRC has also said that there will be no time limit in making this request, but businesses are encouraged to do so soon to obtain a quicker refund.

Taxpayers can also request repayment from HMRC directly rather than contacting their bank, but they must ensure that their bank details are updated using the tax authority’s online service.

Due to COVID-19 restrictions, Payable Orders are not being issued and it may take up to 21 days for a refund to be received if the Direct Debit Indemnity Claim process is not used.

What happens when the VAT deferral period ends?

Businesses need to make arrangements to pay VAT falling due from 1 July 2020 to 31 March 2021 if they do not seek an extension.

Businesses must opt-in to benefit from the option of making payments in instalments over the 2021-22 tax year.