The current coronavirus situation is putting pressure on finances and testing many businesses like never before. As you look to manage cash flow throughout these challenging times, it’s critical that you understand and manage your VAT position in order to safeguard your business and your people.
To support businesses with managing cash through this challenging period, the Government has introduced a number of VAT measures to give some extra breathing space for those that are struggling.
We’ve outlined the key support measures to consider, together with information on how they can be accessed and our practical experience of how HMRC are facilitating them.
Deferment of VAT payments
Businesses are automatically entitled to postpone all VAT payments, including Payments on Account, which fall due between 20 March and 30 June 2020.
You must still file a VAT return on time, and you will need to cancel any direct debits with HMRC to prevent any payments being taken.
The key points to consider:
- Do you actually need to defer your VAT payments? Any VAT deferred will need to be paid in full no later than 31 March 2021. Will this put greater pressure on cash flow further down the road?
- No interest or penalties will be applied by HMRC to amounts that are deferred.
- All VAT payments due after 30 June 2020 should be made in full and on time. It’s worth noting that, depending on how quickly things start to get back to normal, the Government may need to consider extending the deferral arrangements.
Import VAT and duty deferral
On 11 April, HMRC announced that businesses could apply to defer import VAT and duty payments due to be taken by direct debit on 15 April. Though this gave businesses a near impossible window to apply given the Easter bank holiday, you should consider whether there is scope to potentially defer any payments due on 15 May and 15 June.
The key points for duty deferment account holders to consider:
- This is not an automatic entitlement, businesses need to contact HMRC and provide evidence that they’re experiencing severe financial difficulty and cash flow issues
- Provided payments are made in line with any agreement reached with HMRC:
- Bank guarantees should not be called upon and do not need to be increased
- Deferment accounts should remain operational provided all subsequent payments are made on time and in full
- Interest will not be charged
To defer duty or import VAT payments, you will need to contact HMRC. Although the COVID-19 helpline is suggested by HMRC, we would recommend contacting the duty deferment office (03000 594 243 or email@example.com) as our experience suggests that the helpline may be unable to assist.
Unlike the VAT deferral scheme, there is no set date for payment of deferred import VAT and duties. As such, we would recommend that you consider what length of deferral is required and how quickly you will be able to pay the deferred import VAT and duty to HMRC. You should also be able to demonstrate and evidence the need for the deferral to HMRC.
For importers who do not use duty deferment accounts, HMRC will consider deferral requests on a case-by-case basis using the Time to Pay arrangements (outlined below).
Time to Pay Agreements
If your business is having difficulty meeting its tax and duty obligations on time and in full outside of the circumstances outlined above, a Time to Pay agreement should be considered. Time to Pay allows businesses and self-employed individuals to agree a payment schedule with HMRC to defer current VAT and duty payments over a longer period of time.
The key points to consider:
- Time to Pay is agreed on a case-by-case basis.
- HMRC has set up a dedicated coronavirus helpline (0800 024 1222) for all businesses who need to agree Time to Pay. This should be the first port of call, and please be aware it can take time to get through to someone who can help.
- It is important that you request the right level of support. There is no point agreeing Time to Pay if your business is not going to be able to deliver the payments required in addition to future payments of tax and duty due within the period of the deferral.
Our practical experience of the helpline suggests that it will only provide Time to Pay for VAT, PAYE, corporation tax and self-assessment payments.
Where the helpline is unable or unwilling to assist, we are here to help. We have experience in agreeing Time to Pay arrangements in more complicated cases and for the less mainstream tax and duty payments.
For example, we recently assisted a client to defer payments of Machine Games Duty (MGD). The helpline refused support as MGD was not within its remit. We used our pre-existing contacts in HMRC’s debt management team and were able to agree a six month Time to Pay agreement for the client within 24 hours.
HMRC are continuing to process any VAT reclaims and refunds due to businesses, and in practice we are seeing that HMRC appear to be accelerating repayments due to clients (with the condition that any further checks and verifications will be completed once things are back to normal).
Voluntary disclosures and VAT assurance visits
HMRC are no longer accepting certain forms on paper. For instance, voluntary disclosures can no longer be sent to HMRC by hard copy letter. The designated email address for the disclosure of errors is firstname.lastname@example.org.
Where you need to contact HMRC, we can help you to manage your relationship with HMRC.
HMRC have also placed VAT assurance visits on hold. A number of our clients have received letters stating that no further action will be taken until HMRC write to the client again.
Please get in touch with your regular Haines Watts contact for any further information or assistance on any of the points above. If you are registered for VAT in other EU countries, we’d be happy to provide details of the measures being introduced by overseas tax authorities.