Deferred Tax

Have you deferred tax during 2020?

HMRC has published new guidance for businesses that used its VAT deferral scheme in 2020. The new deferred tax guidance relates to any additional VAT resulting from changes to your returns. What do you need to know?

deferred tax

HMRC’s deferral scheme allowed businesses to delay payment, interest free, of their VAT bills due between March and 31 May 2020 until 31 March 2021.

The payment deadline was later extended to 31 March 2022, but to take advantage of this you must opt into the scheme that will soon be available via your HMRC VAT account. New guidance explains the steps you need to take if you correct an error in a return for which you deferred VAT which increases the amount payable.

 HMRC says you should first complete a FormVAT652 giving details of the error and send it to the “VAT Error Correction Team”. After HMRC has processed it and you’ve received a statement of account confirming the new VAT balance you can ask HMRC’s COVID-19 helpline to add the extra to the deferred amount.

You can pay the deferred VAT including the additional amount resulting from the error correction by 31 March 2021 or, as mentioned earlier, opt into a new deferral scheme, which means you won’t have to pay what you owe until 31 March 2022. 

If you made a correction and received a statement of account reflecting it on or before 29 January 2021 you might not be allowed to include the additional VAT in the new VAT deferral scheme. Instead, the amount of the increase must be paid by 31 March 2021.

However, you can ask by contacting HMRC’s COVID-19 helpline. You’re still allowed to use the new VAT deferral scheme for the original amount.

HMRC increases the VAT you must pay for a period for which you deferred payment, the same rules apply to the additional tax payable, i.e. you can defer it until 31 March 2022 unless the tax was increased prior to 29 January 2021.

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