Many business owners took advantage of the opportunity to defer VAT in 2020 as a result of the Government’s Covid-19 business relief. While we’re not out of the woods with lockdown just yet, it helps to know when you are required to make repayments, and how you can go about doing that.
The good news is there are two ways you can pay back your VAT, giving you a little leeway when it comes to cash flow.
- If you’re ready to pay in full, you can do so by 31st March 2021.
- If you’re not able to pay in full, you can join the VAT deferral new payment scheme, which allows you to pay your deferred VAT in installments by 21st June 2021.
Let’s look at those options in more detail.
- You want to pay your deferred VAT in full by 31st March 2021
If you deferred VAT that was due between 20th march 2020 and 30th June 2020 and still have payments to make, you can pay the whole thing off by the March deadline.
If you have the means to make a full payment, you can do so via the standard way you pay your VAT bill here.
- You want to pay in installments by 21 June 2021
If you don’t have the cash flow means to pay in full, don’t worry. There is another option available to you. You can join the VAT deferral new payment scheme.
In order to take advantage of this scheme, the same deferral eligibility applies – you’ll need to have deferred VAT payments between 20th march 2020 and 30th June 2020 as a result of Covid-19.
The scheme went live online on 23rd February 2021 and closes on 21 June 2021, allowing you to make your repayments in one of two ways:
- Either pay your deferred VAT in equal instalments, interest free
- Or, choose the number of instalments, from 2 to 11 (depending on when you join)
When you join the scheme depends on how many installments you can opt for. If you join the scheme in March 2021, you’ll be able to repay in up to 11 installments.
Here’s a handy table from HMRC that shows how the installments work as the months go on:
How to join the new scheme
As with most dealings with HMRC, there are a couple of things you’ll need handy to join the VAT deferral new payment scheme.
- Your Government Gateway Account login details (if you don’t already have a Government Gateway Account you can create one up here)
- Any outstanding VAT returns from the last 4 years – you’ll need to submit these before you can join the scheme
- Know the amount of deferred VAT you owe, including the amount of any payments you’ve already made
You’ll also want to make sure any errors on your VAT returns are corrected ASAP, to enable you to join.
Money worries can creep up at the best of times, but you can take practical steps to be more in control of your finances
Yes, the continued ripple effects of Covid-19 are causing cash flow worries for many business owners. The thing is, it doesn’t take global pandemic to cause a cash flow problem. We can have a crisis in our business even when there’s no crisis happening in the outside world.
Cash is what makes or breaks our businesses. Unfortunately, we’ve seen businesses with the best ideas and the best intentions fail because of cash flow problems. So whether this was the first time you had to think about paying VAT late, or this is just one of many times you’ve faced the threat of a penalty, we can all learn something from the experience to make our businesses better.
The most successful businesses are able to plan ahead for risks and opportunities, because they know their numbers – and you can too. You can take practical steps to gain control, make more money, and spend less. Check out all our cashflow hub and all our free resources, so you can love your business again, rather than it being a source of resentment.