Tax agents cannot help with deferred VAT

The online portal to apply to spread VAT deferred from summer 2020 will be open from 23 February 2021.

However tax agents cannot use this system on behalf of their clients.

All VAT registered businesses were allowed to defer their VAT payments for amounts due for the period from 20 March to 30 June 2020.

UK businesses deferred approximately £30bn VAT using this process.

HMRC charged no interest or penalties on that outstanding VAT debt.

Businesses have been free to pay the amount due at any time.


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You need to pay up!

HMRC had indicated that businesses would have to pay the VAT debt in full by 31 March 2021.

Now businesses have the chance to defer at least some of the VAT debt until January 2022. HMRC will charge interest at 2.6% on this from from 1 April 2021.

HMRC is asking businesses to pay their VAT debts in full by 31 March 2021 if they can.

You should contact HMRC to arrange a payment plan to spread the payment of the debt over up to 11 installments ending in January 2022.

HMRC will impose penalties for late payment and could start debt collection action against the business.


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Online portal

HMRC is introducing an online automated process accessed through an online portal.

This will open on 23 February and remain open until 21 June 2021.

The company director or business owner must access this portal themselves.

Tax agents can’t use it to arrange a VAT payment plan on behalf of clients.

This is because as part of the payment plan the business must set up a direct debit to make regular payments from their business bank account.

Tax agents don’t have the authority to make payments out of clients’ bank accounts and so cannot enter the agreement on behalf of clients.

HMRC will allow businesses to arrange a deferred VAT payment plan even if they have already entered a time to pay arrangement for other taxes.


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Before a business can use this new VAT deferral scheme it needs to get all its VAT ducks in a row as follows:

  • submit all its outstanding VAT returns for the last four years
  • correct any errors on past VAT returns
  • know how much VAT was deferred
  • know how much of that deferred VAT debt is still outstanding
  • have enough cash ready to pay the first installment of the VAT due immediately
  • The business owner/ director must have the authority to set up a direct debit to pay the balance of the debt by monthly payments

Where a direct debit can’t be set up the business owner must call HMRC on 0800 024 1222.

If the business doesn’t have the cash to even pay the first installment of VAT, the owner should contact the HMRC payment support service on 0300 200 3835.


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Hard deadline

The Government wants all deferred VAT paid by 31 January 2022.

The later the business signs up to this scheme to spread the payments, the fewer installments will be available to it.

For example, if the business joins the scheme by 19 March it can spread the payments over 11 installments starting in March 2021.

But if it joins the scheme in June 2021 it can only spread the debt over eight installments.

If the business owner can’t use the online portal, they should call HMRC on 0800 024 1222 to arrange a payment plan.

This telephone service will be open until 30 June 2021.


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