The Chancellor announced a VAT deferment measure on 20 March 2020 as a means of supporting businesses in the light of the coronavirus outbreak. Here’s the salient points presented as a Q&A.
Q. What liabilities can be deferred?
A. All VAT payments falling due from 20 March 2020 to 30 June 2020 can be deferred.
Q. When does any deferred VAT need to be paid to HMRC?
A. It will need to be paid by 31 March 2021 otherwise you will be in default and run the risk of incurring a surcharge penalty.
Q. What does this mean in practice?
A. Most taxpayers submit quarterly VAT returns. The VAT that can be deferred is the VAT due on VAT returns ending: –
- 29 February 2020 (where the due date is 7 April 2020);
- 31 March 2020 (where the due date is 7 May 2020); and
- 30 April 2020 (where the due date is 7 June 2020).
Q. What is the application process?
A. Approval is automatic with no applications or notifications required. Of course, taxpayers can pay any VAT due by reference to the normal payment dates and not take advantage of the deferment opportunity.
Q. Do I need to cancel my existing direct debit?
A. You should cancel your direct debit with your bank if VAT is to be deferred. This can be done online if you are registered for online banking. A new direct debit authority will need to be put in place at the end of the deferment period if paying by direct debit is the preferred method of payment.
Q. Is interest payable on amounts deferred?
A. No interest will be charged under this provision.
Q. What about the VAT return itself?
A. VAT returns should be prepared and submitted by the normal due date.
Q. What if I file monthly VAT returns?
A. Most taxpayers filing monthly VAT returns will be in a net repayment position. VAT repayment returns will be processed in the normal way by HMRC with valid claims repaid. Any VAT due on VAT returns for periods ending 29 February 2020, 31 March 2020 and 30 April 2020 can be deferred.
Q. What if I file annual VAT returns?
A. Those on annual accounting normally make interim payments during the year with a balancing payment made when the VAT return is submitted at the end of the year. Interim payments are payable on the last working day of a month (the cycle will vary from taxpayer to taxpayer) with the balancing payment, if any, due two months after the end of the VAT return period. Any interim or balancing payments due between 31 March 2020 to 30 June 2020 can be deferred.
Q. What if I am a ‘large taxpayer’ and account for VAT under the payments on account (‘POA’) scheme?
A. Taxpayers within the POA scheme must normally make two interim payments during a VAT return period with a balancing payment made with the submission of the VAT return. Payments need to be made on the last day of the month (which will vary from taxpayer to taxpayer). Any instalments or balancing payments between 31 March 2020 to 30 June 2020 can be deferred.
Q. Are any taxpayers excluded?
A. Non-established taxable persons cannot benefit from the deferment measure.
Q. What about liabilities arising before 20 March 2020?
A. The measure does not apply to VAT liabilities arising before 20 March 2020 (in essence, that due on VAT returns for periods ending on or before 31 January 2020).
Q. What about liabilities arising after 30 June 2020?
A. The measure does not apply to VAT liabilities arising after 30 June 2020 (in essence, that due on VAT returns for periods ending on or after 31 May 2020), but it is always possible that the relief may be extended later in the year.
Q. If I receive an assessment from HMRC in the deferment period correcting an error made on a previously submitted VAT return, can payment of the assessment be deferred until 31 March 2021?
A. This is not entirely clear, but it is assumed not unless the due date for the underlying VAT return falls within the period of deferment.
Q How do I eventually pay any VAT deferred?
A. Further information about how to pay any VAT deferred will be provided by HMRC in due course.
Q. What if I have VAT payment concerns irrespective of whether advantage is taken of the deferment opportunity?
A. A special HMRC support line (0800 024 1222) exists for taxpayers to call to discuss their specific circumstances. Time to pay arrangements can be agreed in deserving cases. More information regarding the support line can be found here.