COVID-19 – the Chancellor fights to save businesses with VAT Payment Deferral

Glyn Edwards

There was very welcome news for businesses last Friday 20 March 2020, with the Chancellor announcing that all UK VAT registered businesses will be able to defer VAT payments due to HMRC until 30 June 2020, says Glyn Edwards, VAT director at MHA MacIntyre Hudson.

What we know

All UK businesses are eligible, with the relief being automatically applied, so there is no need to speak to HMRC to arrange or agree this. The deferral period will apply from 20 March 2020 until 30 June 2020.

What does this mean for my business?

Businesses with a VAT payment due in this period will not need to make that payment to HMRC.

Whilst the guidance does not explicitly state that there will be no penalties for late payment of VAT, there is specific wording in relation to income tax

“No penalties or interest for late payment will be charged in the deferral period”.

Given that no regime exists for the late payment of VAT returns, only the possibility of default surcharges, it’s clear that no surcharge will be made where the government has announced a deferral period. The periods covered by the deferral are:

02/20 period ending 29 February.

03/20 period ending 31 March.

04/20 period ending 30 April.

The period of deferral will be until the end of the 20/21 tax year, with amounts due during this deferral period being paid by 5 April 2021.

What happens if I am a large business on payments on account?

You will not be required to pay your monthly instalments during the deferral period.

If you have a 05/20 VAT return there is a possibility that you may also be able to defer this VAT payment as well as the 02/20 return. This is because your due date for payment is 30th June, unlike other taxpayers where the due date will be 7th July. However, this is probably not the intention of the Chancellor and it is likely that this may be clarified in the coming days.

Is there anything else I should know?

We recommend that all businesses continue to prepare their VAT returns and submit them on time. This is to protect against the default surcharge regime after the deferral period.

Please cancel your direct debit with HMRC for this period.

It’s important to note that if the return is a repayment rather than a payment, then it will not be affected by this arrangement and HMRC will process it as normal.

Unfortunately, the deferral scheme does not apply to non-UK businesses which are VAT registered in the UK. These businesses must continue to submit VAT returns and pay the liability on time.

Normal time to pay arrangements can still be discussed and agreed with HMRC for payments which are due outside this deferral period, and businesses are encouraged to contact HMRC to discuss their requirements.

Glyn Edwards, VAT director, MHA MacIntyre Hudson
glyn.edwards@mhllp.co.uk

Close