VAT and COVID – what you need to know if you still have delayed payments outstanding
All deferred VAT payments should have been dealt with by now, but HMRC has flagged in its latest bulletin for August that if your business is one of those that still has not managed to complete the payments that have been delayed, then you could be facing a penalty.
During COVID, HMRC allowed businesses to defer VAT payments to help with cashflow problems that companies faced as a result of the lockdowns. These payments could have been deferred to either March 31, 2021, when a lump sum would have been due, deferred via a payment scheme which you needed to sign up to by June 21, 2021 to allow you to pay in interest-free instalments, or by contacting HMRC to arrange how to make the payment by June 30, 2021. All of these payments should have been completed by March this year, but if they have not been paid in full, then you should act as soon as you can.
Any outstanding payments could face a penalty
If you have not yet dealt with your deferred payments, then you could now face a 5% penalty from HMRC and potentially also face interest charges on any amounts outstanding. But if your company is still struggling with these payments, then you should contact HMRC sooner rather than later.
If you have not paid your deferred VAT in full, whether you met the previous deadline of setting up arrangements to pay before June 30, 2021, or not, then the 5% penalty could be applied based on the amount of VAT that is outstanding at the time.
Appealing a penalty
If you feel a penalty has been unfairly applied, then you can appeal against it. You would need to have a reasonable excuse, which would include: a close relative dying close to when the penalty payment is due, an unexpected hospital stay or that you are suffering from a serious or life-threatening condition, or that your software failed when you were about to make the payment. Other relevant reasonable excuses can be found on Gov.uk.
If none of these apply, then you would need to make the payment within 30 days.
We can help you meet your obligations
If you think you have outstanding deferred VAT and do not know how to deal with this properly, then please get in touch and we can help to suggest solutions for you.