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Deferred UK VAT: What to do if you missed the deadline

UK authorities have clarified the penalty for failing to pay deferred VAT by the 30 June 2021 deadline.

HMRC previously explained that businesses that deferred VAT between 20 March 2020 and 30 June 2020 had two options to avoid penalties. Taxpayers could elect to pay their VAT in full by 31 March 2021. Alternatively, had a a choice join a new deferment scheme no later than 21 June 2021.

HMRC now says that if you failed to meet either of those conditions, you need to contact the HMRC COVID-19 helpline to make further arrangements. 

The tax authority warns that if you do not pay the outstanding VAT full or make an arrangement to pay by 30 June 2021 you could be charged a 5% penalty or interest.

Don’t hesitate to get in touch with Vatglobal for expert guidance on how to optimise your VAT compliance and avoid penalties. 

VAT penalties quantified

More broadly, UK tax authorities are updating the mechanism for penalising late payments.

HMRC’s new system for late VAT payment comprises two penalties.

The first penalty works as follows:

The taxpayer does not incur a penalty if they pay the tax owed within 15 days after the due date. If you do not pay the tax after 15 days, you incur the first penalty. The penalty is set at 2% of tax outstanding. If the taxpayer does not pay the required amount after day 30, the penalty increases to 4% of tax outstanding.

If tax remains unpaid on day 31, HMRC applies the second penalty. This penalty accrues daily at a rate of 4% per annum.

Preventing VAT penalties

UK taxpayers that are unable to meet the deadlines should contact HMRC and ask for a Time-To-Pay (TTP) arrangement. If granted, the taxpayer and HMRC will agree on a date to pay the outstanding VAT without additional penalties accruing. 

Of course, the best way to avoid penalties is to ensure you have effective, robust VAT compliance processes in place to ensure you are always 100% VAT compliant. 

Vatglobal’s technology-driven VAT compliance solution makes meeting your VAT obligations simpler, more efficient and more effective. Get in touch with Vatglobal to ensure you are always 100% VAT compliant, everywhere you have an obligation. 


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