COVID-19: VAT deferral update

26 March 2020

Following the Chancellors’ Covid-19 update last week and other government announcements, please find below how the UK government will be supporting businesses during the Coronavirus pandemic in relation to VAT.

The deferral for VAT payments applies for the period 20 March 2020 until 30 June 2020. All VAT registered traders are eligible to do this. This is an automatic offer and no application is required. This will generally mean the deferral of one quarter’s VAT: the payment due on 7 April, 7 May or 7 June 2020 or if VAT returns are submitted monthly, the monthly payments due on each of these dates. Businesses will not need to make a VAT payment during this period.

HMRC has confirmed that businesses that usually pay their VAT by direct debit will need to cancel this facility. Businesses that have a direct debit mandate in place to pay their VAT and wish to defer payment will need to contact their bank to cancel that mandate. This needs to be done as soon as possible for the payments that are due to be collected for the VAT return period ending 29 February 2020. For the larger traders that make payments on account, the same rules apply – there is no requirement to make the monthly payments.

Although no payment is being made during this period, businesses should continue to file their VAT returns by the due date.

Taxpayers have until the end of the 2020/21 tax year to pay any liabilities that accumulate during the deferral period. VAT refunds and reclaims will be paid by the government as normal. Businesses will not be able to pay by direct debit until all deferred VAT has been paid in full.

Businesses will eventually need to make arrangements with HMRC to pay the deferred VAT before 31 March 2021. The helpline number is 0800 0159 559. This doesn’t need to be done before the due date as per normal requirements. HMRC are currently experiencing huge volumes of calls from worried businesses whilst trying to cope with a reduced staffing level.

If you are worried about the above or have any questions, please speak to Michelle Dale.