Deferment of VAT

Deferment of VAT

This scheme has now expired and VAT payments will become due as normal.

If you’re a UK VAT-registered business that deferred VAT payments between 20 March 2020 and 30 June 2020, you now need to:

  • set-up cancelled Direct Debits in enough time for HMRC to take payment
  • continue to submit VAT returns as normal, and on time
  • pay the VAT in full on payments due after 30 June

Any VAT payments you have deferred between 20 March and 30 June should be paid in full on or before 31 March 2021. For more information see Pay your VAT bill.

Businesses that wanted to defer their VAT payments, but failed to cancel their direct debits in time can claim a refund.  

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.  

Specifically, it meant 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

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 did 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.  

Claiming a refund of VAT payments due between 20 March 2020 and 30 June 2020 paid in error.

HMRC has confirmed that taxpayers who wanted to defer VAT payments due between 20 March 2020 and 30 June 2020 but did not cancel their Direct Debit in time, can claim a refund.

The best way for taxpayers to obtain repayment, according to HMRC, is to submit a Direct Debit Indemnity Claim to their bank, ensuring that they state they want to claim a refund under the Direct Debit Indemnity Scheme (DDI). HMRC confirms that there is no time limit in making this request.

If the taxpayer wants a repayment from HMRC rather than contacting the bank, they must ensure that their bank details are updated using the online services.

HMRC reminds taxpayers that owing to COVID-19 restrictions, Payable Orders are not being issued and it may take up to 21 days for the refund to be received if the Direct Debit Indemnity Claim process is not used.

You can pay or make payments towards your deferred VAT now or at any time up to 31 March 2021.

We are awaiting confirmation that reinstating a Direct Debit will not result in the deferred VAT being collected immediately. A change in the way that HMRC collects Direct Debits for those in MTD for VAT makes this a possibility and HMRC needs to ensure that does not happen.

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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