Companies now have less than one month left to join the VAT Deferral New Payment Scheme.
The deadline to join the scheme on 21 June has prompted HM Revenue & Customs (HMRC) to issue a fresh warning to businesses that haven’t already joined the scheme, that they face a five per cent penalty if they do not make some form of payment arrangements next month.
Last year, more than half a million businesses deferred VAT payments in response to COVID-19, after the Government announced a three-month deferral for the first tax quarter of 2020.
Companies that deferred VAT payments due between 20 March 2020 and 30 June 2020 were given the choice earlier this year to pay the deferred VAT in full by 31 March, set up a payment plan under the VAT Deferral New Payment Scheme by 21 June or make other suitable arrangements with HMRC by 30 June.
The VAT Deferral Payment Scheme allows taxpayers to schedule payments monthly. The scheme lets business owners pay their deferred VAT in equal instalments, interest-free and choose the number of instalments by direct debit, from two to 11 (depending on when they joined the scheme).
For example, if a business joined by 19 May 2021, they can now pay nine equal instalments, whereas if they join on 21 June 2021, they will make eight instalments, or fewer should they wish to pay the deferred VAT quicker.
To benefit from the scheme, HMRC says businesses must:
The new payment scheme is part of a wider Government package of support, now worth more than £400 billion, which is helping to protect millions of jobs and businesses during the pandemic.
The new payment scheme will continue to help the economy recover by enabling businesses, impacted by the pandemic, to manage their cash flow at this critical time.
Click here to join the scheme today
Eligible businesses that are unable to use the online service can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme or make alternative arrangements to pay until 30 June 2021.
The Treasury has released new details on the next steps it intends to take as part of its long-term tax digitisation plan.
Its timeline for a modernised digital tax system will see HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) programme gradually extended over the next few years to cover most businesses.
Under the current MTD rules, businesses above the VAT threshold of £85,000 are required to keep digital records and provide VAT returns through MTD-compliant software.
However, under the new plan, the programme will be extended to all VAT-registered businesses with turnovers below the VAT threshold (£85,000) from April 2022.
It will then be extended further from April 2023 to all taxpayers who file income tax self-assessment tax returns for business or property income above £10,000 annually.
The Treasury said that the extension of MTD will only affect the way that tax is reported and not the amount that is collected.
Financial Secretary to the Treasury, Jesse Norman, said: “We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century.
“Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”
In a Written Ministerial Statement to Parliament on MTD the Treasury also said that “the Government remains committed to extending Making Tax Digital to other taxes”.
It is hoped that the long deadline to comply with the extension of MTD will give businesses, landlords and agents time to prepare and allow for the development of new products, including free software for businesses with the simplest tax affairs.
There are a number of Government support measures to help businesses through the coronavirus pandemic, as well as various business tax obligations being deferred. However, it can be difficult to keep track of all of the dates, deadlines and requirements, with many being amended, delayed or deferred over the past few months. Read More