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VAT deferral scheme: penalties

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HMRC has updated its guidance on the VAT deferral new payment scheme to cover penalties and interest that may be charged where businesses fail to pay the deferred VAT in full.

Businesses may be charged a 5% penalty or interest if they do not pay the deferred VAT in full or make an arrangement to pay by 30 June 2021. The deadline and 5% penalty are set out in the Finance Bill 2021 (Sch 18 paras 4 and 5).

Businesses unable to pay in full by 31 March 2021 may still avoid being charged penalties or interest by either:

  • joining the new payment scheme by 21 June 2021; or
  • paying the deferred VAT in full by 30 June 2021.

Businesses which have corrected errors on a VAT return relating to the VAT deferral period will not be able to use the scheme to cover extra payments resulting from those corrections after they have joined the scheme.

Any error correction relating to the deferral period that is notified to HMRC after 31 March 2021 cannot be deferred at all and interest will apply. Similarly, where HMRC has conducted a VAT compliance check and found that extra payments are due for the deferral period, those extra payments also cannot be deferred if notified by HMRC after 31 March 2021.

Issue: 1528
Categories: News