VAT deferral for Coronavirus

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The Chancellor has announced measures to help small businesses through the Coronavirus pandemic.

There are two main points on this:

  1. All payments due between 20th March 2020 until 30th June 2020 to be deferred
  2. All payments between those dates are then to be paid off by 31st March 2021

Payment of VAT is due 1 month and 7 days after the end of a VAT quarter. Therefore, the VAT quarters that can be deferred are those ending on 29th February, 31st March and 30th April.

What’s CFO360 UK’s view on this?

This helps businesses who are struggling with cashflow. In our view, the big risk here is that it can be all too easy to spend this VAT money on other things, only to lead to a bigger problem when you do need to pay these balances, by 31st March 2021.

Therefore, if at all possible, we suggest setting up a separate business bank account where you would keep all, or as much as possible, of the VAT balance owed.

Do I need to cancel my Direct Debit?

Yes! It’s very important that you do this, if you have a direct debit with HMRC for VAT, as otherwise the payment will be taken by HMRC as usual.

You can cancel your direct debit by speaking to your bank.

Do I still need to submit VAT returns?

Yes, you still need to submit, but not pay.

Can I pay the VAT anyway, even if I don’t have to?

Yes, you can.

However, we would suggest that, given that it’s unknown how long the current crisis will last, it would be better to simply keep the VAT funds in a separate bank account. That way, at least you have the option of using some of those funds on a temporary basis, until they’re due on 31st March 2021.

Do I have to pay amounts that are currently overdue?

For VAT on the quarter ended 29th February 2020, this is due on 7th April: you do not have to pay these amounts.

However, for any amounts relating to VAT quarters of 31st Jan 2020 or before, we believe that they would still need to be paid, because the current guidance from HMRC talks about “payments due between 20th March and 30th June”. Late payments that were due before the 20th March would therefore still be payable.

What about MOSS returns?

If you currently submit and pay for MOSS, you need to continue to do so: MOSS is not covered by this deferral scheme.

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