On Friday 20 March, you will have heard the welcome news for all UK VAT registered businesses, who have been told that VAT payments due to HMRC between 20 March 2020 and 30 June 2020, will be deferred. We have set out below the key details. A couple of important things to note:

  • You should submit VAT returns on time as usual
  • BEFORE submitting your return, you should cancel any direct debit mandate – this is to ensure that HMRC don’t take the money notwithstanding the deferral offer. This is especially important if you are about to submit your February VAT return.

What we know

  • The deferral period will apply from 20 March 2020 until 30 June 2020.
  • All UK businesses are eligible and it automatically applies. There is no need to speak to HMRC to arrange or agree this.

What does this mean for my business

  • Businesses with a VAT payment due in this period will not need to make that payment to HMRC.
  • Whilst the guidance does not explicitly state that there will be no penalties for late payment of VAT it does for income tax –“ No penalties or interest for late payment will be charged in the deferral period”. There isn’t an interest regime for late payment of VAT returns – only the possibility of default surcharges. These cannot apply where the government has announced a deferral period.
  • This affects the following VAT return periods:
    • 02/20 period ending 29 February.
    • 03/20 period ending 31 March.
    • 04/20 period ending 30 April.
  • The period of deferral will be until the end of the 20/21 tax year.
  • Amounts due during this deferral period must be paid by 5 April 2021.

What happens if I am a large business on payments on account?

  • You will not be required to pay your monthly instalments during the deferral period
  • If you have a 05/20 VAT return there is a possibility that you may also be able to defer this VAT payment as well as the 02/20 return. This is because your due date for payment is 30th June, unlike other taxpayers where the due date will be 7th July. However, this is probably not the intention of the Chancellor and it is likely that this may be clarified in the coming days.

Is there anything else I should know?

  • We recommend that all businesses continue to prepare their VAT returns and submit them on time. This is to protect against the default surcharge regime after the deferral period.
  • Please cancel your direct debit with HMRC for this period.
  • If the return is a repayment rather than a payment, then it will not be affected by this arrangement and HMRC will process it as normal.
  • Normal time to pay arrangements can still be discussed and agreed with HMRC for payments which are due outside this deferral period. Please speak to us to discuss the best way to approach HMRC in these circumstances.

MHA will update you on this matter as any further developments arise.