Last updated 23 March 2020
With cashflow being so important in such challenging times we have put our heads together to think what our clients should be doing to manage VAT in the coming months while we weather the storm. Here is a checklist for you to think about. If you need our assistance with any of these matters please do contact Rupert Moyle, VAT Partner, or Andrew Tate, Partner and Head of Restructuring and Transformation.
Immediate action points
Deferring VAT payments:
- HMRC is deferring VAT return payments, where these are due between 20 March and 30 June this year. We take this to be payments that are one month and seven days after the period end – the usual due date – and where those dates fall within the deferment period, although we anticipate further clarity from HMRC on this. The measure applies to quarterly and monthly VAT returns therefore, ending 29 February, 31 March and 30 April. These liabilities must be paid by the end of the tax year, i.e. in 2021. For VAT this would be the end of March, April or May 2021, but HMRC may mean the 5 April, in line with the income tax year end as this is a joint VAT and Income Tax provision. We expect HMRC to clarify this in due course.
- Deferring payments is entirely optional. If you are in a regular refund position because you are, for example, a housebuilder or farmer, this will not be of interest to you. You should continue to file your returns as normal and receive your repayments accordingly.
- It does not need approval from HMRC.
- VAT returns must be filed on time as normal, but no payment made.
- We would suggest that direct debits are cancelled for the time being (to prevent payment being automatically 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 might also be covered by the deferment measure, but again HMRC may issue further guidance in due course.
- The HMRC announcement appears to apply to UK businesses and perhaps not our overseas established clients, but we are liaising with HMRC to confirm the position.
‘Time to pay’ arrangement
- If you are struggling with paying an existing VAT or tax bill, contact HMRC on 0800 024 1222 to discuss time to pay options. You may need to work on a business plan and /or may need help in negotiating this with HMRC, in which case please call Andrew Tate, our Partner and Head of Restructuring and Transformation.
Other matters you should consider:
- Maximising the VAT you are entitled to – Are you recovering all the VAT on expenditure, such as staff expenses?
- Ensure reliefs are identified – Are you paying VAT on expenditure (or income) you shouldn’t be (are there reliefs available)?
- Input VAT accrual – Consider whether you can accrue for any VAT incurred on expenditure – is there any VAT that you have paid or on invoices with a tax point during a quarter but that is received after the quarter end? Do your payment authorisation processes unduly delay VAT that could be claimed?
- Bad Debt Relief – Have you claimed Bad Debt Relief (although remember these rules also require you to pay back VAT to HMRC if you haven’t paid a supplier invoice)?
- Applications for Payment – Can you assist your sales VAT cash flow by issuing Applications for Payment for ‘continuous supplies’ rather than full VAT invoices, so that VAT is due when you are paid by customers?
- Alternative Evidence claims – Have you paid VAT you cannot claim due to a lack of an invoice – consider alternative evidence claims?
- Cash Accounting Scheme – Can you switch to the Cash Accounting Scheme to delay VAT due (although this also affects the ability to claim VAT on purchases)?
- Customs Duty savings – Have you paid the right amount of Customs Duty, or is there a more appropriate, lower, rate for the goods imported?
- Overseas VAT costs – Have you incurred VAT overseas you haven’t recovered – is it worth making a claim?
- Move to monthly returns – If you receive regular repayments, are you on monthly VAT returns?
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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