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Tax agents can’t help with deferred VAT

The online portal to apply to spread VAT deferred from summer 2020 will be open from 23 February 2021, but tax agents cannot use this system on behalf of their clients.

12th Feb 2021
Tax Writer Taxwriter Ltd
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All VAT registered businesses had their VAT payments deferred automatically for amounts due to be paid in the period from 20 March to 30 June 2020. Richard Asquith of Avalara estimates that UK businesses deferred a total of £30bn VAT using this process.

No interest or penalties have been charged on that outstanding VAT debt, and businesses have been free to pay the amount due at any time. 

Now pay up 

There was always going to be a day of reckoning, as HMRC had indicated that businesses would be required to pay the VAT debt in full by 31 March 2021. 

However, businesses now have the chance to defer at least some of the VAT debt until January 2022, although any unpaid VAT will accrue interest at 2.6% from 1 April 2021.

HMRC is asking businesses to pay their VAT debts in full by 31 March 2021 if they can. Where the cash is not available the business must contact HMRC to arrange a payment plan to spread the payment of the debt over up to 11 instalments ending in January 2022. 

If they don’t join this scheme to formerly defer the remaining VAT debt, HMRC will impose penalties for late payment, and possibly initiate debt collection action against the business.

Online portal  

To smooth the procedure of agreeing a payment arrangement, HMRC is introducing an automated process accessed through an online portal. This will open on 23 February and remain open until 21 June 2021. 

The company director or business owner must access this portal themselves, tax agents can’t use it to arrange a VAT payment plan on behalf of clients. 

This is because as part of the payment plan the business must set up a direct debit to make regular payments from their business bank account. Tax agents don’t have the authority to make payments out of clients’ bank accounts, so can’t enter the agreement on behalf of clients.

The good news is HMRC will allow businesses to arrange a payment plan for the deferred VAT even if they have already entered a time to pay arrangement for other taxes.

Conditions 

Before a business can use this new VAT deferral scheme it needs to get all its VAT ducks in a row as follows: 

  • submit all its outstanding VAT returns for the last four years

  • correct any errors on past VAT returns

  • know how much VAT was deferred 

  • know how much of that deferred VAT debt is still outstanding 

  • have enough cash ready to pay the first instalment of the VAT due immediately.

The business owner/ director must have the authority to set up a direct debit to pay the remainder of the debt by monthly payments. Where a direct debit can’t be set up, perhaps because there is no UK bank account, or the account has two signatories, the business owner must call HMRC on 0800 024 1222.  

If the business doesn’t have the cash to even pay the first instalment of VAT, the owner should contact the HMRC payment support service on 0300 200 3835.

Hard deadline 

The Government wants all of the deferred VAT paid by 31 January 2022, so the later the business signs up to this scheme to spread the payments, the fewer instalments will be available to it.

For example, if the business joins the scheme by 19 March it can spread the payments over 11 instalments starting in March 2021, but if it joins the scheme in June 2021 it can only spread the debt over eight instalments.   

If the business owner can’t use the online portal, they should call HMRC on 0800 024 1222 to arrange a payment plan, and this telephone service will be open until 30 June 2021.

Replies (11)

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By Paul Crowley
12th Feb 2021 15:42

I like the hard deadline
Otherwise trader would wait to the last day
Really pleased we are out
Way to much time already lost on non charged issues

Much appreciated
Short sharp direct

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By ru68y
13th Feb 2021 13:35

This article doesn’t seem right. You say

“However, businesses now have the chance to defer at least some of the VAT debt until January 2022, although any unpaid VAT will accrue interest at 2.6% from 1 April 2021.“

But the gov website says with regards to interest.

“You may be charged interest or a penalty if you do not:

pay the deferred VAT in full by 31 March 2021
opt into the new payment scheme by 21 June 2021
agree extra help to pay with HMRC by 30 June 2021”

It then says...

“The new scheme lets you:

pay your deferred VAT in equal instalments, interest free
choose the number of instalments, from 2 to 11 (depending on when you join)”

https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-...

Thanks (2)
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By North East Accountant
15th Feb 2021 10:32

Another example of HMRC cutting the agent out the process.

We spend longer helping clients do it themselves rather than us just being able to do it for them.

Thanks (4)
Replying to North East Accountant:
Jason Croke
By Jason Croke
15th Feb 2021 11:01

I think it is because the online process involves bank details and committing to monthly payments over a certain timeframe and HMRC have always been difficult when it comes to taking banking instructions from an agent. The 64-8 only stretches so far, if you know what I mean.

When I do time to pay agreements on behalf of a client, I can negotiate the payment terms and agree initial payment amounts but HMRC insist on taxpayer calling to confirm bank details, so this might be more to do with direct debit guarantee rules rather than VAT/HMRC.

Thanks (0)
Replying to Jason Croke:
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By [email protected]
15th Feb 2021 12:48

The fact is, only a signatory to a Bank account can legally set up a direct debit.

Of course HMRC could provide the option of downloading a paper DD form, which would allow the agent to complete the online stuff and would also deal with the multiple signatories issue.

It seems that HMRC keep doing this and, of course, all that will happen is that agents will use the client's own details to log on and do it for them!

Thanks (0)
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By johnjenkins
15th Feb 2021 10:34

I wonder just how many business can actually pay what they owe, even in installments. I think HMRC are going to have to come up with something a bit longer or even a moretorium if they are to avoid writing a lot of money off.

Thanks (1)
Replying to johnjenkins:
Jason Croke
By Jason Croke
15th Feb 2021 10:53

HMRC have clearly stated that if the business requires longer than the deferred repayment scheme, then the business can contact the business support service and seek a longer "time to pay agreement".

Time to pay agreements are then dealt with on a case-by-case basis and factors in things like income, whether dividends were paid, other loans and debts and HMRC will then decide what level of risk they are prepared to accept/payment terms.

At the end of the day, a business has charged VAT, been paid that VAT in good faith by the customer, the business has a legal duty to pay that VAT to HMRC and like all loans, they need repaying eventually.

Thanks (1)
Replying to Jason Croke:
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By johnjenkins
15th Feb 2021 11:26

Totally agree, but as the old saying goes "needs must".
There could be many business out there that are virtually bankrupt and with no end of covid in sight, how can they make proposals that they might not be able to meet. The courts will be busy so IMV the best option is to operate a moratorium on those that have deferred VAT and are sending in zero returns.

Thanks (1)
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By CORSALOVER2
15th Feb 2021 11:18

Another move by HMRC to do away with agents. First 'no agents to complete SEISS claims. They are trying to force taxpayers into 'doing it themselves' with their absurd 'personal tax accounts' which remain gobbledygook to many tradespeople. How much have they saved by putting these grants out of people's reach? What's next? VAT ? Self-assessment ?

It was easy getting clients' VAT postponed. We all know how hard it now is to set up a replacement Direct Debit! Too long, too impersonal, I'm just telling clients to wait till the threatening letters arrive and then pay immediately with their business debit cards.

Seems to me like we are getting shouldered out by Big Brother......Glad I'm not young any more.....

Thanks (0)
Replying to CORSALOVER2:
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By Normade
15th Feb 2021 15:54

CORSALOVER2 wrote:

Another move by HMRC to do away with agents. First 'no agents to complete SEISS claims. They are trying to force taxpayers into 'doing it themselves' with their absurd 'personal tax accounts' which remain gobbledygook to many tradespeople. How much have they saved by putting these grants out of people's reach? What's next? VAT ? Self-assessment ?

It was easy getting clients' VAT postponed. We all know how hard it now is to set up a replacement Direct Debit! Too long, too impersonal, I'm just telling clients to wait till the threatening letters arrive and then pay immediately with their business debit cards.

Seems to me like we are getting shouldered out by Big Brother......Glad I'm not young any more.....

Totally agree - what are our professional bodies doing to stop HMRC taking more and more away from Agents?
HMRCs Trust Register was madness - allowing Agents to set up the Trust Register in 2018 but then in 2021 insisting on getting Trustees to "claim" each Trust before the agents can update the Register!

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By Kaylee100
15th Feb 2021 11:39

HMRC initial guidance was that it would be interest free!

This was on the Gov.uk website in November which I sent to a client.

"On 24 September 2020, the Chancellor announced that businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period.
Instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free. You will need to opt-in to the scheme, and for those who do, this means that your VAT liabilities due between 20 March and 30 June 2020 do not need to be paid in full until the end of March 2022.
Those that can pay their deferred VAT can still do so by 31 March 2021.
More information on the scheme will be available on GOV.UK in the coming months."

Luckily that client has the funds now and are going to fully settle.

Thanks (0)