Government launches VAT instalment scheme for deferred payments

Farm businesses that deferred VAT payments during 2020 have just six weeks to pay their delayed bills or join a new pay-by-instalment scheme, accountants have warned.  

The UK government’s VAT deferral scheme was introduced last year to help businesses struggling financially due to the coronavirus pandemic.

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Outstanding debts must be paid up in full by 31 March 2021. However, Nick Hart, VAT director of accountant Saffery Champness, said farms that are still facing difficulties should consider paying the bills in instalments.

A new scheme was launched by the government on 23 February 2021 and taxpayers have until 21 June 2021 to join. 

“To take advantage of the instalments opportunity, taxpayers must opt in,” Mr Hart stressed.

The opt-in request has to be submitted by the taxpayer themselves and not an agent or other third party acting on their behalf, he added.

How the scheme works

Under the instalment scheme, the deferred liability must be paid in full by 31 March 2022 through equal monthly payments.

The maximum number of instalments allowed is 11.

To make use of the maximum timeframe, farmers must sign up by 19 March 2021.

Acceptance into the scheme by HMRC is dependent on the taxpayer:

  • Still having deferred VAT to pay
  • Being up to date with their VAT returns
  • Paying the first instalment when opting in
  • Paying the remaining instalments by direct debit (although payment alternatives could be agreed with HMRC).

The opting-in process is completed through a Government Gateway account, so taxpayers would need to set up an account if they do not already have one.

Mr Hart explained that the scheme cannot be used to pay any other VAT liabilities apart from the deferred liability from last year.

Any other VAT debts and payments should be discussed with HMRC.

Payment options deadlines

  • Pay the deferred VAT in full by 31 March 2021
  • Opt in to the new payment scheme by 21 June 2021
  • If further difficulties – agree extra help to pay with HMRC by 30 June 2021

More information 

Further information, including a sign-up link is available on the government’s website.

Farmers needing extra help should contact HMRC by phone 0800 024 1222.

Are you, like many other farms, missing out on tax claims for R&D?

If you’re a limited company, you could be eligible for tax credits if you’re carrying out R&D on your farm. For more information and to find out if you’re eligible visit our R&D tax credits page.

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