Coronavirus - Deferring VAT and Income Tax
No UK business will have to make a VAT payment between 20 March 2020 and 30 June 2020.
- This is more welcome news, but again we await further detail. The guidance says that no payment is required in this period, however, it is not clear as to whether therefore this applied to VAT periods ending on 30 June.
- It appears that all UK businesses will have the ability to, in effect, skip the payment due in the quarter that falls in that period. We anticipate anti-avoidance measures being introduced to counter artificially bringing forward sales in the deferred period and thereby seeking an extra deferment.
- If you pay your VAT by direct debit you will need to ensure that the payment is cancelled (although HMRC has advised that won’t be taking payments). VAT Returns will still need to be filed on time.
- Also, later down the line, be aware that if, due to the impact of COVID-19 on your customers’ businesses, they cannot pay your bills you may be able to ultimately reclaim output VAT through the “Bad Debt relief” mechanism, in which case the VAT deferred in your forthcoming return may not have to be paid at the end of the tax year.
The 31 July 2020 Self-Assessment Tax Payments will be deferred for ALL individuals automatically and added to the payment due on 31 January 2021. No applications are required and no penalties or late interest will be applied if you defer your payment on account. HMRC have also scaled up their Time to Pay offer to businesses and individuals in financial distress.
- This applies to ALL Self-Assessment Tax Payers, including sole traders and partners who are running a trading business, company directors who receive dividends from their company, landlords and pensioners.
- For those Tax Payers who need additional support, there is still the option of making a claim to reduce payments based on a drop in income, or extending the payment deadline further by using HMRC Time to Pay arrangements.
Please note that this is only a summary of the main issues and should not be construed as advice. Every effort has been made to ensure factual accuracy at the time of publication (1 April 2020), however, the government response to the Coronavirus situation is changing all the time, so it should not be relied upon completely.