Deferral of tax payments due to COVID-19

As a result of the financial disruption caused by COVID-19, many businesses and individuals alike are facing significant cash flow issues. As such, the Government have announced that certain VAT and income taxes may be deferred until next year, in a bid to ease this disruption. HMRC have also agreed to allow UK VAT registered businesses impacted by COVID-19 further tax deferrals under time to pay agreements. HMRC have decided to support businesses and defer the

When will I have to pay my VAT?

On 20 March 2020 Rishi Sunak, the Chancellor of the Exchequer, announced various financial packages aimed at alleviating the pressures caused by COVID-19. One of the measures which he implemented was the deferral of many taxes, one of them being VAT.

Therefore, payments of VAT which were due to be made between 20 March 2020 and 30 June 2020 will now not need to be made until 31 March 2021. Importantly, you will not need to inform HMRC that you are deferring this payment.

What does the deferral of VAT mean for my business?

Essentially, if your business was paid by customers on a VAT-plus basis, you would usually pay your VAT in quarterly instalments. Therefore, by deferring payment until next year it effectively provides a temporary working capital facility for your business.

Can I still pay my VAT on time?

Yes. If you are a UK VAT registered business then there are two options available to you:

  1. Pay VAT on time before 30 June 2020; or
  2. Defer the payment.

Importantly, following the Chancellors announcement, HMRC will not be charging any interest or tax penalties on monies deferred due to COVID-19. If you are unable to meet any of these payments due to coronavirus then you may be able to seek help from HMRC’s time to pay service.

When is the date set for self assessment?

Similarly, under the income tax Self Assessment system, payments which were meant to be made by 31 July 2020 can deferred until 31 January 2021. It is not necessary to be self-employed to be eligible for this deferral to apply to you. The guidance provided by HMRC, previously stated that you would only be eligible for this deferral if you were self-employed, this has now been clarified with HMRC stating that the deferral applies to all self-assessment taxpayers.

As above, this is optional and you may still chose to pay your income tax on time and avoid the larger payments in January next year. However, if you do chose to defer the payment then you need to cancel any direct debit that you may have with HMRC.

Book your Initial Consultation with our Specialist Tax Solicitors

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We provide tax advice and representation against HMRC. Get in touch with our expert tax solicitors and barristers so we can get you a result. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.

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