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DEFERRAL OF VAT PAYMENTS
The government has announced an immediate deferral for UK businesses of VAT payments that would otherwise have been due between 20 March to 30 June 2020.
The vast majority of organisations file calendar quarter VATreturns which would have meant the VAT owing for the quarter to 31 March 2020would have been payable to HMRC over the course of the next few weeks. Thedeferral of this payment will be welcome news to many and appliesautomatically. Businesses deferring this payment need not seek any additionalspecific agreement. Taxpayers will be given until the end of 2020 to payany liabilities that have accumulated during the deferral period. VAT refundsand reclaims will be paid by the government as normal.
The deferral measure is for UK businesses. Overseas businesseshaving difficulties paying their UK VAT may need to consider applying foradditional time to pay.
HOW IT WORKS.
Underthe government's proposals VAT payments being deferred will not now need to bemade until the end of the tax year and no application is required. The Tax Faculty hassought clarification from HMRC about payments made by direct debit. Returnsshould still be filed on time.
Thedeferral for VAT paymentsapplies from 20 March 2020 until 30 June 2020. All VAT registered traders areeligible. This will generally mean the deferral of one quarter’s VAT: thepayment due on 7 April, 7 May or 7 June 2020 or the monthly payments due oneach of these dates. This is an automatic offer and no application is required.Businesses will not need to make a VAT payment during this period.
The Tax Faculty has asked HMRC toconfirm whether it will automatically suspend collection of direct debitpayments of VAT during this period and is awaiting a response. If HMRC does notautomatically suspend direct debit payments businesses will need to canceltheir direct debit mandate and will need to remember to set it up again in duecourse. Agents cannot set up direct debit mandates on behalf of taxpayers.
Taxpayers have until the end of the2020/21 tax year to pay any liabilities that accumulate during the deferralperiod. VAT refunds and reclaims will be paid by the government as normal.
Businesses should continue to filetheir VAT returns by the due date.
Thedeferral for income tax selfassessment applies to the second payment on account for 2019/20 due on 31 July2020 which is deferred until 31 January 2021.
Eligibilityis limited to the self-employed ie, the deferral does not apply to those thatare in self assessment but are not self-employed. The Tax Faculty has soughtclarification from HMRC, but the current understanding is that the deferralapplies to any taxpayer who was self-employed in the 2018/19 tax year on whichthe payment on account is based.
This is an automatic offer and noapplication is required. Very few taxpayers pay their self assessmentliabilities by direct debit because the system requires a separate direct debitmandate to set up for each individual payment. Any taxpayer that qualifies forthe deferral and has already set up a direct debit mandate for the payment onaccount due on 31 July 2020 should consider cancelling it.
Selfassessment returns should still be filed by their due date and it may beadvantageous to file the 2019/20 return as soon as possible after 5 April 2020.This might facilitate planning for the tax payment due in January 2021 andperhaps crystallise any refund due, including as a result of any loss reliefavailable.
No penalties or interest for latepayment will be charged in the deferral period.