COVID-19: Payment deferral for VAT and Income Tax
Mar 26, 2020
A payment deferral for VAT and self assessment income tax has been put in place for three months, to help support businesses during the COVID-19 pandemic.
Under the government’s proposals, VAT payments being deferred will not now need to be made until the end of the tax year and no application is required.
If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.
The deferral for VAT payments applies from 20 March 2020 until 30 June 2020. All UK VAT registered businesses, including charities, are eligible. This is an automatic offer and no application is required. You don’t have to notify HMRC if you intend to take advantage of the payment holiday, and you can still pay your VAT bill as normal if you wish.
Normal VAT payments due during this period are 7 April, 7 May or 7 June 2020 (or the monthly payments due on each of these dates). Businesses are now not required to make a VAT payment during this period.
You will have until the end of the 2020/21 tax year to pay any liabilities that accumulate during the deferral period. VAT refunds and reclaims will be paid by the government as normal.
Be aware that the deferral is for the VAT payment only. You should still continue to file your VAT returns by their due date, i.e. 7th of the month.
If you normally pay your VAT by direct debit to HMRC then you must remember to cancel your direct debit with your bank if you are unable to pay. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return – the recommendation is at least 5 working days before the payment is due to be taken from your account. You’ll also need to remember to set the direct debit up again in due course. As accountants we cannot set up direct debit mandates on behalf of taxpayers.
Income Tax deferral
The deferral for Income Tax Self Assessment applies to the second payment on account for 2019/20. This is due on 31 July 2020, but payments may now be deferred until 31 January 2021.
You are eligible if you are due to pay your second self-assessment payment on account on 31 July. You do not need to be self-employed to be eligible for the deferment. The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so.
This is an automatic offer and no application is required. Very few taxpayers pay their self assessment liabilities by direct debit because the system requires a separate direct debit mandate to set up for each individual payment. If you qualify for the deferral and you’ve already set up a direct debit mandate for the payment on account due on 31 July 2020 you should consider cancelling it.
Self assessment returns should still be filed by their due date, and it might be sensible to file your 2019/20 return as soon as possible after 5 April 2020. This may help you plan for your next tax payment due in January 2021, and perhaps highlight any refunds which you may be due, including any loss relief available.
No penalties or interest for late payment will be charged in the deferral period.
You can read more about the government’s support for UK businesses. If you have any queries or concerns regarding making VAT or self-assessment payments, please send us an email and we’ll be happy to help.