VAT Holiday

19/05/2020

£30bn VAT payments suspended until June 30, 2020

Chancellor Rishi Sunak announced a VAT payments deferral on March 20 to support businesses with cash flow during the COVID-19 pandemic.

It will amount to a £30bn credit line for over two million businesses in total – and means that all businesses with a UK VAT registration have the option to defer VAT payments due between March 20 and June 30.

Businesses will have until March 31, 2021 to pay any VAT deferred as a result. VAT credits and refunds will be paid as normal during the period.

What you need to do

You don’t need to inform HMRC if you wish to defer payment and take advantage of the VAT holiday – all you need to do is simply opt in to the deferral by not making VAT payments due in this period as HMRC will automatically withdraw the VAT declared in the VAT return and can’t stop this process. If you pay by Direct Debit you should contact your bank and cancel this immediately. It’s best to do this in good time so that HMRC does not attempt to automatically collect on receipt of their VAT return.

You can, of course, continue to make payments as normal during the deferral period should you wish, and HMRC will also continue to pay repayment claims as normal. You must continue to submit VAT returns as normal.

Looking forward – what do we expect to happen next?

What we do know is that any VAT due will be payable by the end of the 2020/21 financial year, which is March 31, 2021 – the date for monthly VAT payers. But for those VAT-registered businesses on quarterly staggers, the position is slightly more complex. Although unconfirmed, it’s likely that, depending on return due dates, payment dates will be: March 31, 2021; April 30, 2021; or May 31, 2020.

It’s important to note that there’ll be no interest or default surcharges due on deferred VAT.

As we are receiving daily bulletins from the Government on the current situation and new tax updates, there’s always a chance that there may be an extension in July to the VAT deferment, meaning direct debit payers should pause before reinstating their payments, but anything further around this will be announced in the coming months.

For further information click here.

Prydis

This article was written by Prydis

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