Deferral of VAT payments: COVID-19
In order to ease out the financial burden on the taxpayers, the government has relaxed the VAT payment deadline. VAT registered businesses in the UK which have a VAT payment due between 20 March 2020 and 30 June 2020, can either choose to defer the payment of VAT until a later date or to pay the VAT due as usual, as suitable to them. Even if they choose the former option, HMRC will not charge any interest or penalties on any such deferral.
All UK VAT registered businesses, having a VAT payment due between 20 March 2020 and 30 June 2020 are eligible to defer the VAT payment.
The deferral period under the extension is from 20 March 2020 and 30 June 2020.
Businesses that choose to defer the VAT payment of the aforementioned period need to make the payment of VAT due on or BEFORE 31 March 2021.
VAT payments that are due after the end of the deferral period will need to be paid as usual.
Which VAT payments can be deferred?
The following VAT payments can be deferred:
- 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.
It is important to keep in mind that deferral does NOT cover payments for VAT MOSS or import VAT.
Only the VAT payment deadlines have been eased. You still need to file your VAT returns as per your VAT return filing deadlines.
The VAT reclaims and refunds will be processed by HMRC as usual and most repayments are paid within 5 working days. Repayments cannot be offset against any deferred VAT, but they will offset against existing debts.
If you are in repayment position then, you can apply online to move to monthly returns to improve your cash flow.
Payments on Account
In the case, if you defer payment on the account between 20 March 2020 and 30 June 2020 but the balance the payment is outside of these dates, the amount you must pay is the balancing payment less any deferred payments. Also, note that deferring payments will not create a repayment.
How to defer VAT payment?
Deferral of VAT payment is an automatic offer. NO application is required.
Current status (September 2020):
As planned, the scheme came to an end on 30 June. Businesses now need to set up any canceled direct debits in time for payment of their next VAT return.
Also, VAT deferred between 20 March to 30 June through the scheme can be paid through ad hoc payments and overpayments ahead of the deadline if preferred, so long as full payment is made by that date.