23 June 2020
‘All good things must come to an end’ said no-one ever when talking about getting an automatic extension to paying your VAT payment to HMRC. Back in March, as part of the Covid-19 measures, HMRC automatically deferred all VAT payments due for the period 20 March 2020 to 30 June 2020, meaning there is no requirement to pay your VAT bill until 31 March 2021. This deferral period covered the following:
- Quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
- Payments on account due between 20 March 2020 and 30 June 2020
- Annual accounting advance payments due between 20 March 2020 and 30 June 2020
HMRC are now encouraging all businesses to re-instate their direct debits in plenty of time, then HMRC can collect the next payment when it is due. HMRC has assured that their payment collection software will not attempt to collect the VAT due from the deferral period.
If your next VAT return is for period 05/20, you need to get the direct debit re-instated as soon as possible. If you don’t do this you must remember to pay electronically by 7 July 2020.
If you find that you're unable to pay the VAT due at the end of your next VAT period and need additional time to pay, please contact HMRC before the payment is due to arrange a time to pay. HMRC have a dedicated helpline for this 0300 200 3835. If you do call, please quote 'V1'.
Business as usual
As businesses begin to trade again, the effects of being closed could lead to possible cash flow issues. There are a couple of things that you could do to help with this from a VAT perspective –
- If you have had a drop in turnover, it may be that you are eligible to use the flat rate scheme to account for VAT. For more information on this please read: https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses
- If you are in a repayment trader, you should consider changing to monthly VAT returns. In addition to this, if your VAT return requires HMRC authorisation, managing the process efficiently will avoid unnecessary delays. HMRC aim to complete such checks as quickly as possible
- If the business is obliged to make payments on account, can these be reduced or even removed entirely if the revised forecast trading position is significantly different to the prior year?
- If you have customer debts older than 6 months, make a bad debt relief claim
- For businesses whose customers take 30/60/90 to make payment, you can:
- Switch to cash accounting if your turnover is below £1.35 million. This will enable you to account for VAT on a cash basis rather than an accruals business.
- Issue requests for payment initially instead of issuing VAT invoices. Follow this up by issuing VAT invoices when the customer pays in full. This would prevent paying over output tax to HMRC before your invoices are paid by your customers.
Other important points
During the whole Covid-19 hysteria, there has been some other changes in relation to VAT, some are temporary, and some are here for good. Either way, they need to be considered -
- The implementation of the domestic reverse charge for the construction industry has been postponed until 1 March 2021
- Until 31 July 2020, PPE can be imported free of duty and VAT. Applications must be made to HMRC for a relief certificate prior to the goods being imported. Depending on how the pandemic progresses, there is possibility of this deadline being extended
- With immediate effect, HMRC reduced import VAT and duty to nil on the importation of items used to help find a treatment/cure for Covid-19 such as animals for scientific research and substances for biological and chemical research
- For any option to tax made during the period 15 February 2020 to 30 June 2020, you have 90 days to notify the option
- With effect from 1 May 2020, e-publications are now subject to VAT at 0%
- There has been issues with the C79’s for March. Some businesses were not issued with a C79 for March, or the C79 was issued containing the February 2020 data. HMRC advises businesses to use the most recent C79 that they have received
- For solicitors and conveyancers, HMRC have announced that with effect from 1 December 2020, you will no longer be able to treat postal property search fees charged to your clients as ‘disbursements’. VAT will be chargeable at 20% on the recharge of such costs
It’s been a hectic couple of months for all businesses. Over the next couple of weeks almost all businesses will be open again with trade hopefully returning to normal over the coming weeks.
If you are affected by any of the above or you have any questions or concerns, please speak to your usual UHY partner or Michelle Dale.
