The UK government is supporting businesses during the coronavirus pandemic by deferring VAT and self assessment payments for six months.

I have outlined below how the proposed action will work:

VAT

The deferral for VAT payments applies from 20 March 2020 until 30 June 2020.

All VAT registered traders are eligible.

This will generally mean the deferral of one quarter’s VAT: the payment due on 7 April, 7 May or 7 June 2020 or the monthly payments due on each 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.

HMRC have yet to confirm whether it will automatically suspend collection of direct debit payments of VAT during this period. If HMRC does not automatically suspend direct debit payments businesses will need to cancel their direct debit mandate and will need to remember to set it up again in due course.

Taxpayers have until the end of the 2020/21 tax year to pay any liabilities that accumulate during the deferral period.

VAT refunds and reclaims will be paid by the government as normal.

Businesses should continue to file their VAT returns by the due date.

Income tax

The deferral for income tax self assessment applies to the second payment on account for 2019/20 due on 31 July 2020 which is deferred until 31 January 2021.

Eligibility is limited to the self-employed i.e, the deferral does not apply to those that are in self assessment but are not self-employed.

HMRC are yet to confirm, but the current understanding is that the deferral applies to any taxpayer who was self-employed in the 2018/19 tax year on which the payment on account is based.

This is an automatic offer and no application is required.

Self assessment returns should still be filed by their due date and it may be advantageous 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 and perhaps crystallise any refund due, including as a result of any loss relief available.

No penalties or interest for late payment will be charged in the deferral period.

Time to Pay – Corporation Tax, PAYE and CIS

At present HMRC will consider deferring payments for Corporation Tax, PAYE and/or CIS where the business is affected by the virus.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities, however our experience so far has shown that HMRC are being very flexible with payment deferrals.

Whilst initially targeted towards specific industries (travel, entertainment, bars, restaurants and hotels), we’ve had clients in other sectors negatively impacted also make successful applications for deferrals.

Typically, instalments of no longer than 12 months can be granted, however under these circumstances we expect there to be special concessions made.

HMRC are prepared to discuss this situation where a business with a current Time to Pay arrangement in place that they now cannot or will struggle to meet due to the disruption caused by the virus.

HMRC will take into account your specific circumstances when considering:

  • Agreeing an instalment arrangement
  • Suspending debt collection proceedings
  • Cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.

HMRC have set up a dedicated Helpline: 0800 0159 559.

If you have any queries or require any further information please do not hesitate to contact me.