Under a temporary change announced by HMRC in March, businesses have been able to defer certain VAT payments in recent weeks. Now, however, with the deferral period due to end on 30 June 2020, businesses who have cancelled direct debits with HMRC will need to prepare to pay VAT liabilities due in July. An important point to note is that VAT returns for the period ended 31 May 2020 are not eligible for deferral as the deadline for receipt of these returns and payments is 7 July 2020.
What to do if you took advantage of the Covid-19 VAT payment deferral option
From 1 July 2020, to avoid a VAT default, you will need to:
- set-up new direct debits using your online VAT account (this needs to be done at least three working days before your payment is due);
- submit your VAT return as normal; and
- pay VAT in full on payments due after 30 June.
Remember that any VAT payments deferred between 20 March and 30 June will need to be paid in full by 31 March 2021.
It is important to factor this into your future cashflow budgets and plans. If cashflow is tight, check if there are any financial supports that your business may be able to avail of. Information and advice is available through the FPM Evolve programme. Contact us now to check your eligibility.
Businesses with short-term cashflow difficulties may be able to set up a Time to Pay Arrangement with HMRC. Note, however, that it is important to contact HMRC well before payment is due as they are unlikely to agree to a Time to Pay Arrangement if the payment deadline has already passed.