VAT payment deferral
Businesses do not need to pay VAT liabilities arising in the period from 20 March 2020 to 30 June 2020. Businesses will have until the end of the 20/21 tax year to make any payments deferred under the scheme. To be on the safe side, we think you should assume that the payment is due by 31st March 2021.
There is no deferral of reporting VAT so you should file VAT returns as normal.
If you have a Direct Debit with HMRC to pay VAT make sure you cancel it to avoid HMRC taking the money anyway. That’s advice we received directly from HMRC!
Example
ABC Ltd usually reports VAT for the quarter ended of March 2020 and pays by 7th May. The payment in May need not be made and may be deferred and paid by 31 March 2021. The VAT for quarter ended 30 June 2020 will be reportable and payable, as normal, on 7th August 2020 and the VAT for the equarter ended 30th September 2020 will be payable as normal on 7th November 2020. Effectively, anyone who reports VAT for quarters ended in March 2020 or April 2020 will get a deferral.
It is not clear whether this deferral will be interest free. Either way it’s the “loan” of one quarter’s VAT to VAT registered businesses on 2 of the 4 VAT cycles and we think, to those on monthly cycles paying in the defined period.
This is an automatic scheme. No application to HMRC is required. Business can just do it.
Must you do VAT returns as usual?
We think YES. There is no mention of deferral on VAT reporting, which we recoomend should continue as normal. Do NOT MISS your VAT reporting deadlines or you will continue to run the risk of incurring fines and/or penalties.
Self Assessment payment on account deferral for the self employed
If you are self-employed, you do not need to make the payment-on-account for the 2020/21 tax year which is due on 31st July 2020. You will have until 31st January 2021 to make the payment. But remember though, if you make POA’s, you will be paying the 2021/22 POA as well as any deferred 2020/21 POA on 31st January 2021. That potentially makes January 2021 an extra heavy tax payment month.
Are you self-employed?
In our view this definitely means sole traders and partners. We think it should also apply to directors of limited companies who typically have POA’s to make due to their dividends. However, you’ll perhaps be surprised to hear that there is no statutory definition of “self employed”. It is a complex area of the law that we don’t want to get into here.
It is unclear, but we think you are not entitled to the deferral unless you can substantiate some form of self employment. For example, if you make POAs because you own rental properties and report rental income in your self ssessment tax return, we don’t think you may defer the July 2020 POA.