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Deferring Import VAT and Duty Due on 15th May 2020

Businesses with a deferment account will be able to delay (interest free) the payment due on the 15th May covering the imports for April. The delay can be a maximum of three months. The business needs to be facing severe financial difficulty due to COVID-19. Last month HMRC announced that the March payment could be deferred but only gave one working day for businesses to make the request. They have given 10 days’ notice this time.

 

The Normal Process

Most businesses when importing either have to pay or guarantee to pay any VAT and duty due before the goods are released into free circulation. There are three ways in which businesses can do this:

  1. Upfront payment via the FAS system – effectively making a payment into HMRC’s account which is matched against an import entry
  2. Using the freight forwarders deferment account*
  3. Using the businesses own deferment account*

*Deferment accounts are paid on the 15th of the following month. Most freight forwarders will ask for the payment within a week of clearance to ensure they have the funds to pay the amounts to HMRC.

 

How to request the extension

Businesses will need to contact HMRC for approval. The arrangement can be for an extended period for making full or partial payment without having their guarantee called upon or their account suspended.

If the business also delayed the April payment they should email the Central Deferment Office cdoenquiries@hmrc.gov.uk confirming that the payment extension is being requested for the May payment due to COVID-19 and should also indicate that their financial situation remains the same (or has worsened).

All other requests can be made by contacting the Central Deferment Office at the email address above, or by phoning 03000 594243 or the COVID-19 helpline on 0800 024 1222, 8am and 4pm Monday to Friday (excluding bank holidays).

You need to explain how COVID-19 has impacted the businesses finances and cash flow.

Please note – Businesses will need to cancel the direct debit.

 

Impact on current limit

The HMRC system resets the balance at the beginning of each month to Nil. The outstanding payment will not impact your current limit so no need to increase the guarantee to cover the outstanding payment.

 

What about Excise?

Excise payments are normally due on the 29th of each month, if you would like to delay these payments you should contact the COVID-19 helpline to on 0800 024 1222 discuss an enhanced Time to Pay arrangement.

 

Speak to your agents if using their deferment account

The deferment team confirmed that anyone (including freight forwarders) could request the extension, so if you have used their deferment account. Speak with them to see if they have requested it and if they will share the benefit with you.

 

What if I use the FAS payment method normally?

HMRC hinted that you could request the delay last month in these circumstances but have confessed that they do not know how to practically get goods released and are “Urgently working to find a solution”. The COVID-19 helpline mentioned above should be contacted to see if you are eligible.

 

 

FEATURING: Liam Dushynsky
Liam is an Indirect Tax director specialising in VAT, Customs Duty and other indirect tax matters. Liam joined PKF Francis Clark in 2005 as part… read more
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