Measure
Around 600,000 businesses took up the option to defer VAT payments totalling an estimated £34 billion which would otherwise have fallen due between March and June 2020. These deferred amounts would have been due to be settled in full by 31 March 2021.
The government has confirmed details of a payment scheme that will allow businesses to pay the deferred VAT in up to 11 equal, interest-free, monthly instalments from this month, instead of by 31 March 2021. Businesses can pay in fewer instalments but there must be a minimum of 2 instalments.
The measure also provides for a penalty of 5% of any deferred VAT that is outstanding if businesses have not paid in full, opted into the instalment scheme, or made an alternative arrangement to pay by 30 June 2021. The normal default surcharge will not apply to deferred VAT.
Any business which deferred VAT payments which fell due between March and June 2020.
Any business that has not paid the deferred VAT in full by 31 March 2021 will need to opt into the instalment payment scheme by 21 June 2021, or agree alternative payment arrangements by 30 June 2021, in order to avoid a penalty.
This measure confirms many of the details of the instalment payment scheme that have already been announced. It is not surprising that a decision has been made to set a 5% penalty for failure to pay any deferred VAT, rather than trying to administer late payments through the existing default surcharge system.