HMRC’s latest guidance notice on VAT deferred due to coronavirus
Jan Garioch CA discusses HMRC’s latest guidance notice on VAT deferred due to coronavirus.
The deadline to take advantage of paying by interest free monthly instalments expired on 30 June 2021 and HMRC warn that a 5% penalty and interest may now be charged. However, they flag that it is possible to have a reasonable excuse against a penalty and businesses impacted should take action.
VAT deferred due to coronavirus
At the end of July 2021 HMRC issued a guidance notice regarding VAT deferred due to coronavirus which should ring alarm bells for any trader who has outstanding deferred VAT without an agreed plan to spread payments.
To recap on VAT deferred due to coronavirus, in an attempt to alleviate the economic impact of the pandemic, businesses automatically qualified to defer VAT payments due between 20 March 2020 to 30 June 2020. In February 2021, a new scheme was announced so that businesses which took advantage of the original deferral could opt to pay that VAT in up to 11 equal monthly instalments from March 2021, interest free. Unlike the original scheme it was necessary for businesses to actively opt in, and the ultimate deadline for contacting HMRC to make an agreement on time to pay was 30 June 2021.
HMRC’s latest notice regarding VAT deferred due to coronavirus emerged on 27 July 2021, and states that a business may be charged 5% penalty or interest if it did not pay in full or agree arrangements by 30 June 2021. The penalty will be due within 30 days of the penalty assessment, although it is possible to appeal against it if the business has a reasonable excuse. It is worth bearing in mind that HMRC state they will consider coronavirus as a reasonable excuse for missing some tax obligations. Any business with VAT deferred due to coronavirus which they have not yet paid and where they have not agreed payment arrangements with HMRC should act promptly.
The best-case scenario would be to pay the deferred VAT and avoid a penalty by contacting HMRC regarding a reasonable excuse for failing to act by the 30 June 2021 deadline. In any event, with the threat of interest and penalties, it would be unwise to leave this problem to fester.