What is the VAT Deferral Scheme?

Coronavirus Support

The VAT Deferral Scheme was announced by the government to assist VAT registered businesses with their cashflow during the Coronavirus crisis.

Who is eligible for the VAT Deferral Scheme?

All businesses within the UK which are registered for VAT.

How does the VAT Deferral Scheme help my business?

The requirement to make the next VAT payment is to be deferred. This will assist businesses with short term cashflow problems.

How do VAT registered businesses claim the deferral?

There is no requirement to apply for this scheme. The process is automatic.

What period does the VAT deferral Scheme cover?

There are to be no VAT payments made for the next quarter. This is a period from 20th March 2020 to 30th June 2020.

It means that for most VAT registered businesses their next VAT payment due will be either:
Quarter End 31st May 2020 due to be paid by 7th July 2020
Quarter End 30th June 2020 due to be paid by 7th August 2020
Quarter End 31st July 2020 due to be paid by 7th September 2020

When does the VAT deferral payment need to be made?

The deferred VAT payments need to be settled by the end of the tax year, which is 5th April 2021.

To clarify the VAT returns and deferred VAT payment date will be as follows:
Quarter End 29th February 2020 now due to be paid by 31st March 2021 (Company) or 5th April 2021 (Partnership or Soletrader)
Quarter End 31st March 2020 now due to be paid by 31st March 2021 (Company) or 5th April 2021 (Partnership or Soletrader)
Quarter End 30th April 2020 now due to be paid by 31st March 2021 (Company) or 5th April 2021 (Partnership or Soletrader)

NOTE: There is now a VAT deferral payment scheme where payments can be made in up to 11 monthly instalments. For more information on how to set this up see our VAT deferral payment scheme blog.

What about businesses with VAT refunds?

The government have confirmed that businesses with VAT refunds will receive their VAT refunds due in the normal way.

Do businesses still need to file their next quarters VAT return?

Yes. All businesses must still file their VAT returns in the normal way. It is only the payment of the VAT liability which is being deferred.

Do VAT registered businesses need to cancel their Direct Debit?

Yes. HMRC have announced that if the business wants to take advantage of the VAT deferral scheme and a Direct Debit is in place then it should be cancelled.

Is the VAT deferral scheme compulsory?

No. Businesses can continue to stick to their current payment due dates and pay their VAT as normal. For this reason HMRC are not automatically cancelling Direct Debits as they can’t identify who is and who isn’t taking part in the VAT deferral scheme.

Conclusion of the VAT Deferral Scheme

Any short term help to support businesses with their cashflow at this time is to be welcomed.

At Patterson Hall Chartered Accountants we aim to provide our clients with the most up to date advice in this ever changing landscape. As soon as any further announcements are made we will be sure to update these blogs and notify our clients.

See below for other Coronavirus support available to small businesses:
Coronavirus Support Summary
What is the Job Retention Scheme?
How to claim the Job Retention Scheme Grant?
Income Tax Deferral
Business Support Grant & Rates Relief
Self-employment Income Support Scheme

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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