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The VAT deferral – further guidance

The Chancellor announced a temporary deferral of VAT payments for all UK businesses on 20 March 2020. HMRC has now released its guidance.

In summary:

  • The deferral applies to UK VAT registered business (including those that are non-established in the UK) that have a VAT payment due between 20 March 2020 and 30 June 2020 relating to:
    • VAT return periods ending 29 February, 31 March and 30 April
    • Payments on account due in this period
    • Annual accounting advance payments due in this period
  • No application is required to defer VAT payments. Businesses will simply not pay the VAT liability due in the deferral period
  • The deferral does not cover:
    • Any VAT payments due under a time to pay arrangement. We recommend that you contact HMRC if you are struggling to make these payments
    • VAT MOSS payments
    • VAT due in relation to disclosures and assessments
    • Payments due of any other taxes
  • HMRC will not charge interest or penalties, including surcharge penalties on any amount deferred during this period
  • VAT returns should still be submitted to HMRC on time
  • HMRC will continue to process VAT reclaims and refunds as normal during this time
  • For businesses that are due to make payments on account (POAs) during the deferral period, but for which the balancing payment falls outside the deferral period (i.e. for VAT periods ending June 2020 onwards), the balancing payment is the amount that would otherwise have been due as if the payments on account had been made e.g. for a June 2020 return:
    POA due in May 2020 £300K Deferred (due by 31 March 2021)
    POA due in June 2020 £300K Deferred (due by 31 March 2021)
    VAT return net amount £620K  
    Balancing payment £20K Payable by last working day of July 2020

    Note that HMRC will not make any repayments where the balance results in an amount due back to the business.

  • For businesses that defer paying their VAT liabilities during this period, the liability must be paid to HMRC on or before 31 March 2021. HMRC will issue further guidance on how to repay the deferred VAT soon
  • Businesses that pay their VAT liability by direct debit should contact their bank to cancel it as soon possible

Following the deferral period, businesses that are struggling to pay their VAT liabilities should contact HMRC to set up a time to pay arrangement. See our guidance here

Also see VAT tips to help cash flow here

If you have any questions on this or any other VAT matters, do not hesitate to get in touch with me or one of my colleagues VATAdvice@pkf-francisclark.co.uk

FEATURING: Becky Hayes
Becky advises family business, companies and individuals on a broad range of VAT and SDLT matters. Becky’s particular specialisms include land and property, company reconstructions… read more
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