Coronavirus - suspension of VAT payments until 30 June


Paul Cochrane

Paul Cochrane

Tax Director


HMRC is urgently working through the details of the Chancellors announcement on Friday (20th March) that no VAT needs to be paid until 30 June 2020. Further clarification is expected later this week but for the time being we understand that the deferral applies to all VAT liabilities arising in the period 20 March to 30 June. It should therefore apply to VAT return payments falling due in the period, but also Payments on Account liabilities and any assessed amounts which would otherwise be payable.

The Chancellor’s announcement also confirmed that VAT liabilities accumulated in the period will not become payable until the end of tax year 2020/21. The is no formal confirmation of whether interest will be applied, but we would expect not.

How will this work?

  • The relief is automatic and there is no need to apply.
  • Businesses who normally pay by direct debit should cancel their direct debit with their bank. They should do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return (typically the 10th of the second month after the VAT return period end).
  • You should still file your VAT returns as normal by the due date as this has not been suspended.
  • VAT refunds and reclaims will be paid by the government as normal.

Repayments

VAT repayments will continue to be made and repayment returns should continue to be submitted. We would hope that the time taken to process repayments may shorten as this becomes the main focus of HMRC’s payments team, but this may not be the case.

Many businesses may find themselves in a VAT repayment position as income slides but costs remain. It is possible to improve cash flow by moving to monthly returns. In normal times there are conditions attached to this, but we would hope these would be suspended at present.

Maximising VAT reliefs

Ensuring VAT reliefs are maximised becomes more important now to help manage working capital. These range from the use special accounting schemes (cash-accounting, for example) through bad debt relief to the treatment of returned payments. Our VAT advisory team can advise of how these might apply to help your business maximise its cash availability.

For more information please get in touch with your usual Johnston Carmichael contact.

Additional resources

HM Government - business support

Government support - Scottish businesses