Self-service VAT payment plan

Online VAT payment plan: Introduction

HMRC has confirmed that businesses can now set up a VAT payment plan online if they owe less than £20,000 in unpaid VAT

VAT-registered businesses that owe less than £20,000 of VAT can set up a VAT payment plan online as long as they agree to pay off the VAT within six months. These payment plans are usually described as time to pay agreements by HMRC.

The measure of VAT payment plan is part of HMRC’s wider programme to digitise tax reporting and payments, reducing the pressure of HMRC advisers.

‘Providing customers the ability to set up online payment arrangements will reduce the contact needed with HMRC, saving on both time and resource for Debt Management Operations,’ HMRC said.

Eligibility of Online VAT payment plan

Eligible VAT-registered business can set up a VAT payment plan online via the Government Gateway if:

• filed their latest VAT return;
• owe £20,000 or less;
• their bill is due within 28 days of the payment deadline;
• do not have any other payment plans or debts with HMRC; and
• plan to pay off the debt within six months.

Who can benefit from online VAT payment plan?

The service will be available for sole traders, directors, landlords, partnerships, IR35 personal service companies, farmers and haulage companies, as well as international companies.

Who cannot benefit from online VAT payment plan?

You cannot set up a VAT payment plan online if you’re in the Cash Accounting Scheme, Annual Accounting Scheme, or you make payments on account.

Businesses not eligible to use the self-serve time to pay service will have to contact HMRC in the normal way to negotiate payment terms.

If you cannot set up a payment plan online

You’ll need to contact HMRC.

They will ask you:

• if you can pay in full
• how much you can repay each month
• if there are other taxes you need to pay
• how much money you earn
• how much you usually spend each month
• what savings or investments you have

If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible.

If you’ve received independent debt advice, for example from Citizens Advice, you may have a ‘Standard Financial Statement’. HMRC will accept this as evidence of what you earn and spend each month.

If your company is in tax debt

HMRC will ask you to propose how you’ll pay your tax bill as quickly as you can. They will ask questions about your proposal to make sure it is realistic and affordable for you.

You must reduce your debt as much as possible before setting up a payment plan. You can do this by releasing assets like stock, vehicles and shares.

HMRC may ask company directors to:

• put personal funds into the business
• accept lending
• extend credit