When it comes to your own business, there are many balls you will need to juggle at the same time. This includes tax and accounting matters.   

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Following Chancellor, Rishi Sunak’s announcement on 20th March 2020, The UK government is supporting all businesses during the coronavirus pandemic by deferring VAT payments due from 20th March to 30 June 2020 inclusive and payment on account self assessment payments due in July 2020. Coronavirus Q&A: VAT & payment on accounts deferral, your questions answered.

The VAT deferred payment

When is the deferred VAT payment due to be paid to HMRC?

As it currently stands, Businesses will have until the end of the 2020-21 tax year to settle any liabilities due for this period i.e. until the 31 March 2021.

Q) Do I need to apply to HMRC to defer my VAT payment?

The deferral of VAT payments applies automatically so businesses do not need to apply for it.

Q) My VAT quarter-end is February 2020; am I still required to complete a VAT return?

Yes.

You will still need to submit a return by the normal due date as normal, usually one month and a week after your quarter-end.

For example, for a February quarter-end VAT return date your VAT return is due by 7th April 2020.

As the payment date of 7th April falls within the deferment period of 20th March to 30 June 2020, you are not due to pay any tax liability due immediately.

VAT deferment payments also apply to VAT quarter-end dates in March and April 2020.

Q) I pay my VAT by direct debit, will HMRC not collect payment automatically?

HMRC have advised businesses who pay by Direct Debit to cancel their direct debit themselves with their bank if they are not able to pay and to allow sufficient time for the bank’s cancellation process to take effect.

HMRC’s system will not automatically suspend the collection of payments so if you do pay your VAT bill in error because you have forgotten to cancel your direct debit, HMRC will not return the payment to you.

Q) What if I am due a VAT refund?

VAT refunds and reclaims will be paid by HMRC as normal on receipt of the VAT return submission.

Payment on Account deferred payment

The deferral for income tax self assessment applies to the second payment on account due on 31 July 2020 for tax year 19/20.

Q) When is the deferred payment due?

Payment is now deferred until 31 January 2021.

Q) Do I need to apply to HMRC to defer my payment on account?

No. The deferment is automatic and you do not need to contact HMRC.

Q)I pay my payment on account by direct debit, will HMRC not collect payment automatically?

It is unusual for taxpayers to pay their payment on account via direct debit, but if you do, HMRC have advised businesses who pay by Direct Debit to cancel their direct debit themselves with their bank if they are not able to pay and to allow sufficient time for the bank’s cancellation process to take effect.

HMRC’s system will not automatically suspend the collection of payments so if you do pay your VAT bill in error because you have forgotten to cancel your direct debit, HMRC will not return the payment to you.

Q) I am not self-employed, but I need to complete a self assessment tax return to declare other income.  Does this deferral still apply to me?

Following some initial confusion HMRC has now confirmed that the deferral applies to all tax payers.

It is not necessary to be self-employed to be eligible for the deferral. 

Q) I can afford to pay my payment on account, can I still pay?

The deferral is optional – some taxpayers may prefer to make the July payment to avoid a larger payment in January 2021, for example.

Q)Has the deadline changed for self assessment submission for 19/20 tax year?

Self assessment returns should still be filed by their usual due date for tax year 19/20, with the hard deadline of 31 January 2021.

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However, we strongly recommend you complete your tax return sooner, earliest date being 6th April 2020, as you may be due a tax refund which will be paid out immediately or giving yourself more time to plan for your tax bill due in January 2021. 

Please contact us if you would like support with completing your self assessment tax return.  

Can I contact HMRC?

Further guidance on the VAT deferment and payment on account for self assessment and the other government COVID-19 schemes can be found here.

HMRC also have a dedicated helpline with an option for VAT. The number is 0800 0159 559.

While the deferral measures brought in should reduce the need to call HMRC to discuss a time to pay, you can also use the number if you have difficulty submitting the return on time due to coronavirus related issues.

Written by Shaima Todd