Can’t pay the VAT because of COVID-19

Updated: 25th November 2021

Help for businesses who cannot pay the VAT during COVID-19

The coronavirus pandemic has had a disastrous impact on businesses around the country and as we unlock as a nation, the reality is that payments are accruing and taxes are still due despite over a year of either no trading or a huge drop in trade. VAT is a major issue for many businesses and despite VAT deferral measures and other government support schemes, thousands of UK businesses will still undoubtedly struggle to meet their VAT liabilities in 2021.

So what does this mean if your business doesn’t have the financial capacity to pay the VAT? Is there anything you can do to improve your situation and move forward with more confidence in these difficult times?

HMRC’s Time to Pay (TTP) Arrangement

HMRC’s Time to Pay scheme was in place before the coronavirus pandemic took hold, but it’s been extended to help businesses deal with the specific financial challenges of a halted economy and devastating loss of business.

If you can’t pay the VAT because of COVID-19, this scheme could help you avoid penalties for late or non-payment. A Time to Pay arrangement offers an additional period - typically 3-6 months - to pay your tax bills, and in some cases this will be crucial for survival.

So how do you gain access to the scheme? Careful preparation is key, including knowing your numbers and understanding how you’ll be able to repay a new arrangement. If you can offer a small repayment initially, this can also have a positive impact on your application.

Negotiating a Time to Pay deal

It’s important to understand how HMRC approach requests for more time to pay – essentially, they need to know that businesses aren’t deliberately trying to avoid payment and are in genuine financial difficulty.

You’ll need to prepare a business case and provide documentary evidence, such as bank statements, cash flow forecasts, and sales projections, to show the legitimacy of both your current situation and your ability to meet new TTP payments.

HMRC’s Payment Support Service (PSS) is currently open Monday to Friday, 8am to 4pm, on 0333 200 3835. You’ll need your VAT registration number and business bank account information, but crucially, you’ll also need to know exactly how much tax you owe and the changes or mechanisms you’ll put in place to repay a new arrangement if it’s offered.

Consider your business tax liability as a whole

It’s worthwhile taking a broad approach to your financial situation at this time, utilising all the tax reliefs and assistance available to you, and incorporating a Time to Pay arrangement into the overall plan.

This involves considering your full tax liability as a business, including corporation tax, PAYE, and VAT – it helps you make a detailed plan for improving your long-term financial position and moving forward with more confidence.

Not only will you demonstrate to HMRC that you’ve developed a cohesive plan of action, but you offer your business the best chance of survival by being aware of, and taking advantage of, all the support available.

Real Business Rescue are insolvency specialists and have extensive experience of negotiating with HMRC. We can help you if you’re unable to pay the VAT or other taxes because of COVID-19. Please contact one of our partner-led team for more information - we operate an extensive network of offices nationwide and offer free same-day consultations.

Keith Tully

Partner

0800 644 6080
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