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On 30 June 2021, the government’s VAT deferral scheme [1]GOV.UK “Deferral of VAT payments, which allowed companies to pay their due tax in installments, came to an end and this means that firms are once again required to pay their tax as normal.

If you’re a director who is now realising that you can’t make your regular VAT payments, read on to find out what your options are.

VAT COVID

Now that COVID-19: VAT Payment deferral has Come to an End

Although the official period of VAT deferral has come to an end, HMRC is well aware many companies are suffering due to COVID-19.

You are not alone in having difficulties paying HMRC – [2]GOV.UK “Difficulties Paying HMRC and as such they will likely be helpful and understanding if you communicate your situation clearly to them, perhaps suggeting a time to pay arrangement (see below)

But don’t ignore them. HMRC has a rigorous enforcement programme and it’s essential to either pay what you owe or reach an agreed settlement for a payment plan. HMRC will take action if you missed its payment deadline and its tax bill warning letters are ignored. This can lead to winding up a business via the courts.

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Can my Company use HMRC’s Time to Pay Scheme for VAT?

The Time to Pay scheme allows companies extra time to pay their VAT and in some cases, other taxes such as PAYE and Corporation Tax, over an extended period. The payment plan is usually for up to 12 months although, since COVID, they have considered longer terms.

The more information you can provide to an HMRC adviser the better – have your VAT registration number to hand,  bank statements, cash flow forecasts, and future business projections. If you have already received letters from HMRC then be sure to have these to hand too.

The aim when you call is to explain why you have current difficulties, how you expect matters to improve, and over what timeframe. It is known that HMRC is, in some cases, taking a more lenient approach and allowing more affordable monthly installments of the bill because of the pandemic – but no firm will be let off the hook and the best way forward is to agree on a means to repay over a longer period of time. It can also help your case if you agree to make a payment towards the bill, even if this is only small when you contact HMRC.

How to Contact HMRC’s Payment Support Service

The service – [3]GOV.UK “Payment Support Service – to discuss VAT payments and financial hardship can be contacted on 0300 200 3835 on Monday to Friday from 8 am to 6 pm – it is closed on weekends and bank holidays.

Consider a Company Voluntary Arrangement

A company voluntary arrangement is a payment plan with creditors for a percentage of the total amount. HMRC will accept CVA’s if they feel they are the best course of action.

CVA’s must be proposed by a licensed insolvency practitioner, and voted upon by creditors to pass.

If Your Business is Insolvent

Meanwhile, if your business is unlikely to recover, again, seek advice immediately. If liquidation is necessary, monies will still be due to HMRC and the authority has preferred creditor status. This means it can be paid for tax owing from the sale of assets. A licensed insolvency practitioner can advise on how your situation with HMRC, the tax bill, and how a liquidation will be managed.

References

All Company Debt insolvency content is written by our licensed insolvency practitioners.

The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy here.

  1. GOV.UK “Deferral of VAT payments
  2. GOV.UK “Difficulties Paying HMRC
  3. GOV.UK “Payment Support Service