30 Mar VAT payment deferral scheme advice
On the 20 March The Chancellor announced a VAT payment deferral scheme to try and support business cash flow during the COVID-19 pandemic. NetworkIN’s founder has answered some of the key questions that you may have.
Who is eligible for this help?
All businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 30 June.
Any VAT payments deferred during this period have to be paid before 31 March 2021.
What do I need to do to defer a payment?
Simply file your VAT return as usual and on time via your usual method. That is it!
You do not need to inform HMRC you wish to defer payment. You can opt in to the deferral system simply by not making VAT payments due in this period.
If you usually pay your VAT by Direct Debit you need to cancel the mandate straight away. Cancel via your online banking app or over the phone with your bank. You can visit your local branch but please be aware that most banks have now reduced opening hours.
If you file your VAT return and do not cancel your Direct Debit the payment will be processed in the usual way and it will not be returned by HMRC.
You need to have cancelled your Direct Debit before you file your VAT return so that HMRC does not attempt to collect a payment owed upon receipt of the VAT return.
Some banks will not cancel a Direct Debit once it has been presented even if funds have not yet left your account. It can also take a few days for a Direct Debit to be cancelled so the quicker you act the better.
What if my VAT return shows a repayment owed?
HMRC are making repayment claim payments in the usual way.
How can I make payments against a deferred return?
Your VAT reference number and quarter/month detail in the reference box of any BACS or faster payment transfers will allow for correct allocation of funds by HMRC. You can also make card payments via your online HMRC.GOV.UK account.
What if I do not wish to defer and I want to pay my VAT return?
You can continue to make your VAT payments if you wish. By paying a VAT return payment during the period simply opts you out of the scheme.
Top cashflow forecasting and budgeting tip.
Divide your VAT payment amount by nine. This is then how much you would need to pay each month from July 2020 to March 2021 to keep you on track to repay all that is owed before the deadline. Set up a monthly standing order from July so that the payments are automatically paid and you do not have to remember to manually make them. We anticipate that by July all other rescue schemes will have been processed and paid out to you and your business.
If your business is structured towards a weekly financial forecast then divide the amount owed by thirty-eight (the number of weeks between 6 July 2020 and 26 March 2021) and set up a standing order from week commencing 6 July 2020. You will be up to date by the 26 March 2021.