Deferring VAT payments – Updated
Update 18 June 2020
HMRC has made changes to its guidance on the deferral of VAT payments as a result of the COVID-19 pandemic.
This update (issued 18 June) confirms that the deferral period will not be extended after 30 June and that after this date taxpayers will need to:
- Set-up any cancelled direct debits in enough time for HMRC to take payment.
- Continue to submit VAT returns as normal, and on time.
- Pay the VAT in full on payments due after 30 June.
The guidance also reminds those that did defer VAT payments that any VAT payments deferred should be paid in full on or before 31 March 2021.
These payments can be made at any time before this date including in addition to payments with subsequent returns (although the VAT figures should not be included in any subsequent VAT return).
Original article updated 11 June 2020
Deferring VAT payments
Part of the Government’s response to the coronavirus pandemic has been to allow VAT payments to be deferred. Given the demands businesses will have on available cash, this is a welcome respite but it is important to recognise that this is a deferral and not a waiver of the need to pay.
Our understanding of the rules from HMRC’s initial announcement and following their subsequent clarification is:
- This applies to VAT return payments, where these are due between 20 March and 30 June this year – we take this to be payments which are due one month and seven days after the period end – the usual due date – and where those dates fall within the deferment period. This would therefore apply to quarterly and monthly VAT returns ending 29 February, 31 March and 30 April.
- Any outstanding liabilities must be paid on or before 31 March 2021.
- This is voluntary, not mandatory and not something businesses usually in a repayment position would choose, such as housebuilders and farmers/food producers. Repayments will be made to these types of businesses as usual.
- HMRC have clarified that they will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement.
- This does not need approval from HMRC.
- VAT returns must be filed on time as normal, but no payment made. Late returns may still be subject to the default surcharge regime. When where returns are filed on time it is possible that HMRC’s system will not be able to deal with the period un to 30 June and it may still issue default notices as a matter of course. These should be withdrawn but challenged if not.
- HMRC say that you will need to cancel your direct debits to prevent the payment being automatically made, although the ICAEW have reported that if the direct debit is left in place businesses may be able to claim from HMRC a refund of the payment inadvertently made.
- Larger VAT paying businesses, making Payments on Account (POA), should also be able to benefit. It appears that as they do not gain a 7 day extension for filing / paying their returns, a return for the period to 31 May should also be covered by the deferment measure. Whereas the initial announcement said that the deferred payment period was 20 March “until” 30 June, which some interpreted as not including 30 June itself, HMRC’s latest brief states that the measure applies “between” these dates and therefore appears to include 30 June.
- HMRC’s initial brief said that the measure applied to UK businesses, which left some doubt as to whether that meant UK established or UK VAT registered businesses. Their latest announcement clarifies that it includes all UK VAT registered businesses and therefore also payments due from non-established, UK VAT registered entities.
- The measure does not apply to import VAT and VAT MOSS payments
Please contact your usual VAT adviser if you need support on any of these points, or contact us here.
How can we help?
Our team is well resourced and experienced in advising companies and not-for profit organisations, allowing you to focus on managing your business during this trying period. We are set up to work from home so you can expect the same level of service, albeit remotely rather than in-person. We have:
- A team of debt advisory and corporate finance experts used to working with banks and other lenders, and can support you with CBILS and CCFF scheme applications. We understand how lenders are currently making credit decisions, and for CBILS loans above £250k particularly can help with your application.
- Our restructuring and insolvency experts can advise businesses under stress about the options available to them.
- Our tax experts will also be on hand to advise you on applications to HMRC for the Time to Pay initiative, for corporate tax advice and R&D tax claims. We also have VAT & Duty experts who can support you in revising your VAT position.
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