COVID - 19 - How will the deferral of VAT payments work?

The VAT payment deferral announced by the Chancellor on Friday 20 March means that no business will have to make any VAT payments between 20 March 2020 and 30 June 2020, and amounts falling due during this period will not need to be paid to HMRC until the “end of the 2020/21 tax year” (assumed to be 31 March 2021).

Points to note are:

  • The announcement states that it relates to “all UK businesses” so non UK businesses with UK VAT registrations may not be eligible.
  • VAT returns should continue to be filed as usual and on time to allow HMRC to quantify the amount of VAT deferred.
  • For businesses making monthly payments on account it appears that 4 monthly payments are included (those due at the end of March, April, May and June).
  • For businesses filing quarterly returns either their February, March or April VAT return payment will be deferred (ie payments due on 7 April, 7 May or 7 June).
  • HMRC says that only payments on account due up to 30 June can be deferred.
  • Businesses paying VAT by direct debit should ensure that their bank does not process the direct debit for the relevant payment or payments,
  • HMRC will continue to pay repayments or refunds of VAT during the deferral period.
  • All VAT deferred must be paid to HMRC on or by 31 March 2021
  • There is no need to tell HMRC that payment is deferred
  • The deferral does not apply to payments due under the Mini One Stop Shop (MOSS) registration used by suppliers of electronic services
  • UK businesses wishing to defer payments of VAT which had become due before 20 March 2020 (eg the liability for the January return) should contact the HMRC Coronavirus payment line on 0800 0159 559.

If you wish to discuss your VAT arrangements, please contact a member of our VAT team.

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