Deferral of VAT payments due to the coronavirus crisis

HMRC has confirmed that all payments of VAT to HMRC due between 20 March 2020 and 30 June 2020 can be deferred until 31 March 2021, to help businesses manage their cash flow.

HMRC guidance is reproduced in full below. HMRC’s Joint VAT Consultative Committee (JVCC), on which CTG is the charity representative, has produced a Q&A on the VAT deferral. Through the JVCC, we have learned that HMRC will offset repayments against any debts existing before this announcement, but not against any VAT deferred as a result of this announcement. Charities should also note that if they want to make use of the deferral, they will need to cancel direct debits to avoid payments being taken. Businesses must continue to submit VAT returns as usual.

Deferral of VAT payments due to coronavirus (COVID-19)

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:

  • defer the payment until a later date
  • pay the VAT due as normal

HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement.

VAT payments you can defer

You can only defer:

  • quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
  • payments on account due between 20 March 2020 and 30 June 2020
  • annual accounting advance payments due between 20 March 2020 and 30 June 2020

It does not cover VAT MOSS or import VAT payments.

VAT repayments and returns

HMRC will continue to process VAT reclaims and refunds as normal and most repayments are paid within 5 working days.

Repayments will not be offset against any deferred VAT, but they will be offset against existing debts.

You can apply online to move to monthly returns to improve your cashflow if you’re in a repayment position

How deferring VAT affects payments on account

If you defer a payment on account between 20 March 2020 and 30 June 2020 but the balancing payment is outside of these dates, the amount you must pay is the balancing payment less any deferred payments. Deferring payments will not create a repayment.

You will still need to submit your VAT returns to HMRC on time.

If you choose to defer paying your VAT

If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021.

You do not need to tell HMRC that you are deferring your VAT payment.

Payments made by Direct Debit

If you normally pay by Direct Debit you should cancel your Direct Debit through your bank as soon as possible so that HMRC will not automatically collect any VAT due. You can cancel online if you’re registered for online banking.

After the VAT deferral ends

VAT payments due following the end of the deferral period will have to be paid as normal. Further information about how to repay the VAT you’ve deferred will be available soon.

How to get help

Time to pay arrangements are available to all businesses and individuals who are in temporary financial distress as a result of coronavirus. Time to pay arrangements that started before 20 March 2020 should still be paid.

If you’re struggling to pay your tax bill on time, or you’re experiencing financial difficulties you can contact HMRC’s Time to Pay service.

You can also contact the HMRC coronavirus helpline for help and advice.