HMRC have updated their guidance on paying deferred VAT, confirming that a new payment scheme will be available in 2021.
Businesses that deferred VAT payments between 20 March and 30 June 2020, are able to opt into the payment scheme online from 23 February 2021 up to and including 21 June 2021.
Instead of paying the full amount of deferred VAT by the end of March 2021, businesses will be able to make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022. The month the scheme is joined determines the maximum number of instalments available.
HMRC may charge a 5% penalty or interest if you do not pay in full or make an arrangement to pay by 30 June 2021.
To use the scheme, the business must:
- still have deferred VAT to pay;
- be up to date with VAT returns; and
- be able to pay the deferred VAT by Direct Debit.
- join the scheme directly (an agent cannot do this on behalf of the business)
- join by 21 June 2021
- pay the first instalment upon joining the scheme
- know how much is owed (including how much was originally deferred and how much, if any, has already been paid)
If businesses are still unable to pay the VAT due and need more time, they will need to contact HMRC on 0300 200 3835.
Those opting into the scheme, can still request a time-to-pay arrangement for other HMRC debts and outstanding tax.
As well as this, taxpayers may also arrange to pay their January 2021 self assessment tax payments over a 12 month period using HMRC’s Time To Pay arrangements. This January 2021 tax bill may also include the July 2020 payment on account that could have already been deferred, meaning the final payment for July 2020 liabilities could be deferred until as far back as January 2022. Those with self assessment tax bills of £30,000 or less can apply online using the self-serve ‘Time To Pay’ service via Gov.UK and can set up a direct debit to pay any tax owed in monthly instalments, up to a 12-month period.
To arrange a payment plan, see the following link: https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments
New Guidance on Option to Tax
Due to the current COVID 19 restrictions in place, HMRC have updated their policy relating to the notification of option to taxes. The usual 30 day notification period has been extended to 90 days from the date the decision to opt was made. This extension is available for all options falling within the period 15/02/2020 –30/06/2021.
It’s also now possible to submit these forms with an electronic signature however we must provide an email from the client authorising us to use their electronic signature.
Construction Reverse Charge
A new of set of VAT rules specifically for the construction industry was introduced on 1 March 2021 (after numerous delays). The aim of the new “Construction Reverse Charge” is to cut down on fraud in this sector and will have quite wide ranging effects for businesses.
When a transaction is caught by the new rules, the customer rather than the supplier will account for the VAT on the sale to HMRC. The supplier will never receive the VAT from the customer.
The Construction Reverse Charge will only apply to VAT registered businesses that are CIS registered, are supplying services to another VAT and CIS registered business, and where the customer is going to use the construction services they buy in to make their own onward supply of construction services. The Construction Reverse Charge does not apply to services to “End Users”. This means that invoices to property owners, or to a business which plans to sell or rent out the building being worked on, won’t be caught. However, if the customer is a business it will be their responsibility to tell the contractor that they are an End User and so are exempt from the Construction Reverse Charge.
The new rules will apply to most supplies of building and construction services (including builders, joiner, electricians, plumbers, painters, air conditioning installers and many ground workers), and will be relevant to both standard rated and reduced rated services (it won’t be relevant for zero rated new builds).
VAT on e-publications
On 1 May 2020 VAT on digital books, newspapers and magazines, dubbed the ‘reading tax’ and previously Standard Rated, will fall in line with the current VAT legislation of printed books and become zero-rated. This change was due to come in on 1 December 2020 but has been brought forward to make it easier for people to access the online reading material they require while staying at home.
