30th March 2020

Coronavirus – VAT Guide

There has been a succession of announcements of different government support for businesses over the last week or so and it is very easy to get lost in all of the detail.

In relation to VAT we thought it would be helpful to give a standalone summary covering the announcements to date (the most recent being Friday 27 March), the main questions being asked by clients, the answers and practical suggestions.

What support is being given in relation to VAT?

The main support is that all VAT registered businesses are able to defer VAT payments which would ordinarily fall due between 20 March and 30 June.

Do I need to do anything to defer the VAT payment for my business?

No. Normally it would be necessary to contact HMRC and seek to agree a Time to Pay Agreement. These are not normal times and it is not necessary to seek approval for this deferral.

Please note the early HMRC announcements said that VAT deferral is automatic however the wording of the latest announcements refers to VAT payments being optional. Therefore, we recommend that any clients who normally pay their VAT by direct debit cancel their direct debit mandates (see last question in this email).

So which VAT returns will the deferral apply to?

Most businesses have quarterly VAT return periods and the VAT payments arising from the returns for the quarters ended February, March and April 2020 should definitely fall within the automatic deferral.

There is still some uncertainty in relation to VAT returns ending May (because of different due dates) and also how it will apply in practice to large businesses who are required to make monthly payments on account for VAT returns ending May, June and July. HMRC did issue further guidance on 27 March covering payments on account but this guidance focuses only on payments falling due within the deferral period. It provides no clarity on VAT returns which straddle the deferral period and it is likely that further clarification will follow in due course.

How long is the deferral?

The VAT which is deferred will be due for payment on 31 March 2021.

Will there be any interest or penalties?

There will be no interest in relation to the deferral of payment.

Similarly, there will be no penalties in relation to the deferral of payment however businesses should continue to submit their VAT returns on time.

My business receives VAT repayments, will they be affected?

No, VAT repayments should not be affected, and VAT returns should be submitted promptly in the usual way.

Is there any action I should take?

Yes. We recommend that all clients who pay their VAT by direct debit should cancel the direct debit mandate with their bank in order to reduce the risk of HMRC automatically taking a payment which could be deferred. Therefore, please cancel your direct debit mandate re VAT as soon as possible.

If you have any immediate questions, please do not hesitate to get in touch.

Mark Hetherington (VAT Partner)
markhetherington@unw.co.uk or 07715 704739

Ian Coulthard (VAT Senior Manager)
iancoulthard@unw.co.uk or 07785 613599

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