Publish Date

Mar 23, 2020

VAT Payments and Cashflow During this Current Crisis

Special Tax Alert

On Friday 20th March 2020, we had the welcome announcement that the U.K. government would extend the time to make VAT payments due in the period from 20 March 2020 to 30 June 2020.

What does this mean for you?

Should you wish to avail of this facility, you do not need to make your VAT payments which are due between 20th March 2020 and 30 June 2020. These can be deferred to the end of the 2020/2021 tax year (this will depend on your financial year end).

You do not need to apply and no penalties or interest for late payments will be due.

You do need to make sure you still file your VAT returns that fall due during this period. Failure to do so could result in default surcharges (penalties).

Based on the current government easement, the first VAT payment due for many companies will be the 7th July 2020 payment.

What if I normally receive refunds of VAT or because of this crisis my VAT return profile will switch from payments to repayments?

HMRC will continue to pay refunds on time. Therefore, we would recommend preparing your VAT return as early as possible (it can be submitted as early as the day after the period end) – HMRC typically refund VAT within 10 days of submission of the VAT return.

If you are not on monthly VAT returns, you could switch to monthly VAT return filings so as to speed up your VAT refunds.

What happens after 30th June 2020?

At this stage, this is an unknown. We expect that subject to how the current crisis pans out, the government may need to offer additional easements. The government has confirmed that other tax (including additional VAT) deferrals are available – see below for further details on this and other steps you can take to improve your cashflow during this crisis.

What if I need additional extensions to pay my VAT and other taxes to HMRC?

HMRC have expanded the team on their helpline for those struggling to make payments of taxes. The helpline has been inundated with calls particularly in the run up the payroll taxes payment which was due on Friday 20 March. The staff have different financial authorisation levels but have generally permitted three months extensions on payroll taxes.

However, as this crisis progresses you may need to have a more structured payment plan agreed with HMRC over a longer period of time. It is anticipated that HMRC will require a presentation of financial and commercial information in order to approve extended high value time to pay arrangements for taxes, especially for those falling due after 30 June 2020.

The same applies to taxes which fell due before 20 March, either because you could not pay or you had made an error in your declarations.
Any errors in VAT returns should be disclosed to HMRC and if needed, we can work with you to present a payment plan request to HMRC.

We, at A&M Tax UK LLP are liaising with HMRC, industries heavily impacted by this crisis and R3 (the Restructuring and Turnaround practitioners’ body) to establish clear guidelines on what companies will be required to present to HMRC and also what they can reasonably expect so that everyone is on a level playing field…