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UK defers £30bn VAT payments; 2021 repayment schedule

  • Mar 1, 2021 | Richard Asquith

3 March 2021 - the UK hospitality and tourism VAT rate remains at 5% until 30 September 2021. It then goes to 12.5% until 30 April 2022. It then will revert to 20%.

12 Feb - the is a new HMRC deferred VAT repayment scheme offering installment paymetns.

9 Dec - UK will extra time to non-EU resident businesses to obtain their tax certificate status for reclaims. Instead of 31 December 2020 for 2019 claims, the new deadline for the certificate is 30 June 2021. However, the claim must still be in by 31 December 2020.

24 Sep - businesses that opted to defer any VAT between March and June 2020 will no longer be required to repay this as a single lump sum by 31 March 2021. Instead, they will have the option of splitting it into smaller, interest free payments over the course of 11 months - benefitting up to half a million businesses.

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 to do so by 31 March 2021.

If you are still unable to pay the VAT due and need more time, you may apply to HMRC.

19 July - Following the temporary cut in hospitality VAT from 20% to 5% on 12 July, the cash-based flat rate VAT percentages have been adjusted as follows:

  • Catering - reduced from 12.5% to 4.5%
  • Hotels and accomodation - reduced from 10.5% to 0%
  • Pubs: cut from 6.5% to 1%.

8 July - hostpitality VAT cut to 5% from 12 July 2020 to 12 Jan 2021

6 July - 30,000 businesses must file VAT returns by tomorrow as VAT payment deferment ends

21 June - discussion of a temporary UK VAT rate cut, potentially to be announced in early July.

18 June - HMRC warns that the 3-month VAT payments deferment scheme will end 30 June 2020. Details of VAT returns and repayments here.

12 June - importers using the deferred payment scheme may apply now to HMRC for an extentsion on the remittance due on 15 June 2020. Central Deferment Office 

11 June - postpones again the implentation of the domestic reverse charge in the constrution sector. This time until 1 March 2021.

30 April - HMRC has clarifed the rules for the VAT payment deferment for payers on account. If you defer a payment on account between 20 March 2020 and 30 June 2020 but the balancing payment is outside of these dates, the amount you must pay is the balancing payment less any deferred payments. Deferring payments will not create a repayment.

The UK has also brought forward to 1 May a planned cut in VAT on electonic publications from 1 December to 1 May 2020.

Update 10 April. Businesses may delay payment on monthly deferrment accounts the import VAT and tariffs due beyond the current 15 April deadline. They should contact HMRC first. Registered importers without deferrment accounts may contact HMRC for delays on import taxes (VAT and tarriffs) when they fall due.

Update 9 April. HMRC has provided guidance on how to make corrections to filed VAT returns. Tax payers can contact HMRC during working hours:

Email HMRC your VAT652 form

Telephone:+44 (0)300 200 3700

Update 3 April, HMRC confirms that import VAT is still payable during the COVID-19 emergency. The 3-month payment deferral will not apply.

Update 31 March, HMRC has confirmed that VAT payments-on-account may also postpone their VAT payments during the 3-month deferral to 30 June 2020.

Update 30 March, HMRC is announcing this morning that Making Tax Digital for VAT phase 2, digital recordkeeping and links, is being postponed until 1 April 2021. It was scheduled to start 1 April 2020.

Update 26 March, VAT payers on Direct Debits must stop them with their bank or the VAT may be withdrawn. Non-resident (foreign) companies with a UK registrations are entitled to the deferment. No interest will accrue on postponed VAT. Payers on Mini One-Stop-Shop MOSS returns are not included in the scheme.

Update 20 March - the UK has announced that all VAT payments are postponed for the next three months until the end of June 2020 during the coronavirus pandemic. This will benefit around 2 million VAT payers, and delay £30 billion in taxes since it includes pre-crisis trading. The VAT is then due at the end of the 2020/21 financial year.

Any deferred UK VAT will be due in 2021

The VAT not paid during the period is then due to be paid to HMRC by the end of the 2020/21 financial year, which ends on 31 March 2021. 

No interest or penalties will be due on any deferred VAT.

There is no allowances for businesses on special schemes, such as the annual VAT payment. This deferment does not apply to tax payers on the Mini One-Stop-Shop VAT payer. HMRC will continue to process VAT reclaims and refunds as normal during this time.

Returns must still be filed on time to new MTD rules

VAT returns must still be filed on time. There is no special application procedure; it is an automatic measure. Follow Avalara’s live global coronavirus Covid-19 VAT tracker of measures being introduced to reduce the tax burden.

Foreign businesses with UK VAT registration included

Foreign (non-resident) UK VAT registered businesses are included in the scheme, and this has been confirmed by Non-Established Taxable Persons Unit (NETPU) in HMRC's Aberdeen office.

The UK's HMRC on 11 March had announced a telephone support line for businesses and the self-employed concerned about meeting VAT payment deadlines due to the coronavirus COVID-19 outbreak.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara
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