Deferment of VAT

Deferment of VAT

As a further cashflow boost to business, the Chancellor has announced a deferment of VAT return payments due to HMRC between 20 March and 30 June 2020; to be paid instead on or before 31 March 2021.  

Per his statement, this relieves VAT due for all businesses in a VAT payment return position for one quarter.  The scheme is automatic, so no application is required. 

It is assumed that VAT return payments normally taken by direct debit will not be requested by the HMRC system. 

Specifically, it means that any net VAT payments due to HMRC in relation to the following VAT returns can be deferred:

  • 02/20 – payment otherwise due to HMRC by 7 April
  • 03/20 – payment otherwise due to HMRC by 7 May
  • 04/20 – payment otherwise due to HMRC by 7 June

Unless the payment holiday is extended, the payment due for 05/20 VAT returns (due by 7 July) will be payable as normal.

For the avoidance of doubt, it is the overall net VAT liability that is deferred, NOT the output tax.

It does not cover payments for VAT MOSS or import VAT.

VAT returns should still be submitted on time.  The default surcharge regime may still apply if VAT returns are submitted late, but it will not apply solely due to the deferral of payments.  Also, no interest charges will apply to payments deferred.

However, businesses may choose to pay their VAT liabilities on time.  It is presumed that the deferred payment will be taken automatically for businesses who normally pay by direct debit but further guidance may be published by HMRC nearer the time.

VAT repayment returns are not affected and will be paid by HMRC per their normal timescales.  

Time to pay arrangements

If a business already has a time to pay arrangement with HMRC, there is no indication that this holiday would apply to VAT due in relation to VAT returns prior to those listed above as qualifying for the payment holiday.  However, if the time to pay arrangement covers these deferred VAT periods, such payments should be deferred too.  Businesses in this position should liaise with their HMRC time to pay contact in order to confirm.

Payments on account

Any payments due to HMRC within the payment holiday dates, should be deferred.  So for example:

Q/E March 2020
  • POA 2nd instalment – payment otherwise due on 31 March 2020, now deferred
  • Balancing payment – now deferred
Q/E June 2020
  • POA 1st Instalment – payment otherwise due on 31 May 2020, now deferred
  • POA 2nd Instalment – payment otherwise due on 30 June 2020, now deferred
  • Balancing Payment – due, as normal

This appears to give a benefit in excess of a single quarter, so HMRC may issue further guidance on this specific issue.   

This scheme is available to Overseas businesses with a UK VAT registration.      

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