A year ago, at the start of the Covid-19 pandemic, the Government automatically deferred all VAT due to be paid to HMRC between 20 March to 30 June 2020. The direct debit to collect that VAT was not activated by HMRC and no interest or late payment surcharges have been charged on that debt until now.

To avoid interest starting to accrue at 2.6% on the VAT due you must either pay the deferred amount due in full by 31 March 2021 or agree to pay HMRC by monthly instalments so that it is all paid off by 31 January 2022.

The easiest way to arrange a payment plan is through the HMRC online portal which is open until 21 June 2021. You need to access this using your Government Gateway ID and have submitted all your outstanding VAT returns for the last four years. You can set up a Government Gateway account as part of the process if you do not already have one.

The earlier you set up the payment plan the more instalments you will have available to spread the debt. For example, if you arrange the payment plan before 21 April 2021 you can spread the debt over 10 months.

You must be ready to pay the first instalment immediately and set up a direct debit to pay the remainder of the debt by monthly payments. If you do not have the authority on your own to set up a direct debit you must call HMRC on 0800 024 1222. We cannot arrange a VAT payment plan on your behalf as we cannot agree to make payments from your business bank account.

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

Last updated: April 29th 2021.