When the pandemic took hold last spring, one of the big challenges facing businesses was their upcoming spring VAT bill. So business owners breathed a sigh of relief when the Chancellor announced that it would be deferred until 2021.
However 2021 is now here, and businesses will still have to catch up on their VAT payments. We’ll look at the options available to you, but also, how to decide which option is best for you.
If you’d like to repay in instalments, sign up by 21 June at the latest
Essentially, you have three choices at gov.uk:
- pay in full now (before 31 March 2021)
- sign up online for one of the payment schemes on offer, or
- contact HMRC by 30 June 2021 if you need more help to pay
We expected to see fairly simple instalment options to repay your deferred VAT. However there are four points you can join the scheme.
- join by 19 March 2021, pay in up to 11 monthly instalments
- join by 21 April 2021, pay in up to 10 monthly instalments
- join by 19 May 2021, pay in up to 9 monthly instalments
- join by 21 June 2021, pay in up to 8 monthly instalments
You’ll need to be able to pay your first instalment of deferred VAT when you sign up for a scheme.
In addition, you’ll need:
- a government gateway account
- to be up-to-date with your VAT returns and payments
- to know how much you deferred / still have to pay.
Unfortunately, agents cannot access this service. However we can provide assistance (e.g. over video call) if required.
If you do decide to sign up for an instalment scheme, check you have the correct login well before the deadline. Remember that HMRC’s website and helplines may be busy in the run up to each deadline.
Provided you have the practical arrangements in place, here are the business factors you may wish to take into account when selecting the best option.
- Do you have cash available now? You’ll need to pay your first instalment as soon as you sign up.
- Is your business open or closed? If you’re closed but expect to reopen soon, consider waiting until you’ve reopened and have cash coming in before you start to make repayments.
- Is your business seasonal? Again, if you expect to have more cash available later in the spring, you may decide to hold off signing up. Although you will have to pay larger instalments when you do start paying.
- Will you have to start repaying CBILs or BBLs soon? If you have repayments coming up this summer, can afford the VAT payments now, and want to smooth your cashflow, you may decide to start repayments soon.
- What else can you do to improve cashflow? Have you maximised income streams, and minimised costs? Are you getting paid as quickly as you can by customers? And are you making the most of credit terms offered by suppliers?
- Have you run the options through your cashflow tool? For more strategic analysis, we provide clients with access to Fluidly, and can run different scenarios for comparison.
- Do you need additional funding? As well as providing a forecast, Fluidly can help you to access finance from lenders across the UK market.
If you’re unsure what’s the best option for your business, or would benefit from a fresh pair of eyes, contact the team at Wessex, or book your Review today: