HMRC is issuing reminders to businesses which deferred VAT payments under the coronavirus support measures that the VAT will need to be paid by 31 March 2021. For some business owners, this will mean making two VAT payments in the first quarter of 2021.
‘For many businesses this liability is significant as it arose from trading in the period before we went into lockdown’, notes Andrew Sanford, Business Advisory Partner at Blick Rothenberg. ‘With increased Covid infection rates, and the real threat of more localised and national lockdowns many businesses will be fearful that they will have insufficient funds to settle these liabilities.’
Sanford suggests that businesses hit by Covid-19 should be allowed automatically to spread the deferred VAT payment over six months across summer 2021, by which point they are more likely to be trading on a sustainable basis.
As announced by Prime Minster Johnson on 22 September, a further tightening of Covid restrictions in England is expected to last six months, with many businesses (particularly in the hospitality sector) likely to continue to be affected.
The CIOT has also raised questions with HMRC around VAT bad debt relief and the potential interaction with deferral of VAT payments. Where a business had both part paid and part deferred the VAT due in a VAT quarter falling in the deferral period (20 March to 30 June 2020), it will not have paid all the VAT due for that period. The business should claim VAT bad debt relief to the extent that the VAT on unpaid supplies has been paid to HMRC, by apportioning any VAT paid across all supplies made in the period and claiming the proportion of VAT that is applicable to the unpaid supplies.
HMRC is issuing reminders to businesses which deferred VAT payments under the coronavirus support measures that the VAT will need to be paid by 31 March 2021. For some business owners, this will mean making two VAT payments in the first quarter of 2021.
‘For many businesses this liability is significant as it arose from trading in the period before we went into lockdown’, notes Andrew Sanford, Business Advisory Partner at Blick Rothenberg. ‘With increased Covid infection rates, and the real threat of more localised and national lockdowns many businesses will be fearful that they will have insufficient funds to settle these liabilities.’
Sanford suggests that businesses hit by Covid-19 should be allowed automatically to spread the deferred VAT payment over six months across summer 2021, by which point they are more likely to be trading on a sustainable basis.
As announced by Prime Minster Johnson on 22 September, a further tightening of Covid restrictions in England is expected to last six months, with many businesses (particularly in the hospitality sector) likely to continue to be affected.
The CIOT has also raised questions with HMRC around VAT bad debt relief and the potential interaction with deferral of VAT payments. Where a business had both part paid and part deferred the VAT due in a VAT quarter falling in the deferral period (20 March to 30 June 2020), it will not have paid all the VAT due for that period. The business should claim VAT bad debt relief to the extent that the VAT on unpaid supplies has been paid to HMRC, by apportioning any VAT paid across all supplies made in the period and claiming the proportion of VAT that is applicable to the unpaid supplies.
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