A lot of businesses are suffering cashflow crisis as a result of Covid-19. Therefore, the Chancellor has announced a VAT payment deferral in the requirement to pay output VAT from 20th of March to 30the of June 2020. All VAT registered businesses will not be required to make any VAT payments during this troublesome period. Business can defer their payments till 31st of March 2021, while VAT refunds will be paid as normal.
If a business pay VAT via a direct debit, they need to consider cancelling it as it will not be done automatically.
HMRC have also confirmed that VAT deferral includes payments on accounts and interim payments under annual accounting scheme that become due in the period above. The VAT deferral does not cover MOSS payments. We have also not received any confirmation whether payments resulting form assessments are covered by the above arrangements. In these cases, businesses should consider contacting HMRC to appeal if they experience difficulty in paying.
Businesses should remember that it is still important to keep filing VAT returns on time even if payments are deferred.
All VAT payment due after the deferral periods is over should be paid as normal. HMRC will provide further guidance on how to repay the deferred VAT amounts.
Businesses who has difficulties paying the VAT due outside the deferral period should contact HMRC coronavirus helpline on 0800 024 1222. You can find more details in the gov.uk website.
Making Tax Digital
HMRC is trying to help all businesses facing challenges as an impact of coronavirus. Therefore, it has been decided to give businesses more time to put digital software in place to switch to MTD. Such business now has until their first VAT return staring on or after 1st of April 2021 to put digital software in place.
Option to Cancel VAT Registration
The businesses who will be trading under the deregistration threshold may consider deregistering from VAT. However, it is important to know that they will still have to account for VAT on stock or assets on hand at the time of deregistration. You should refer to Notice 700/11 for further guidance. Businesses can consider cancelling their VAT number voluntarily if any of the following takes place:
- the business can satisfy HMRC that its taxable turnover in the next 12 months will not exceed the VAT registration cancellation limit, which is currently £83,000
- a decision is made to close down part of the business and satisfactory evidence can be provided to HMRC that the taxable turnover for the remainder will not exceed the VAT registration cancellation threshold
- the turnover exceeds the registration limit, but the taxable supplies are wholly or mainly zero-rated. If the business makes any standard-rated supplies, it can only cancel its VAT registration voluntarily if its input tax normally exceeds its output tax; if these circumstances apply, the business should then write to the VAT Registration Service explaining why it thinks it should be exempt from registration.
On the turnover grounds VAT deregistration application should have an explanation why the turnover is going to fall below the VAT cancellation limit: loss of contracts, reduced working hour, сchanges in work patterns etc. In this case a turnover calculation is done on a VAT exclusive basis.
Businesses can use HMRC online service to cancel their VAT registration or complete form VAT7 and send it to HMRC by post.
Monthly VAT returns to speed up VAT repayments
If your business input VAT normally exceeds your output VAT, you may consider changing the frequency of the VAT return submissions and start filing VAT returns on a monthly basis.
This will speed up the monthly repayments and each cashflow problems.
Protection from Eviction for Commercial Tenants
Commercial tenants are protected from eviction if hey miss one or two rental payments due to financial difficulties caused by coronavirus. This applies to all payments due by 30th of June. However, the Government may extend this period even longer if necessary.
This cannot be classed as rental holidays for commercial tenants and the payment can be deferred but will still be pending by a later date. If such tenants believe they will not be able to pay their rent, the best option would be to discuss it with landlords as soon as possible.
Companies House
The Companies House is now closed until further notice.
All companies are encouraged to use online to file their accounts and confirmation statements. All queries regarding the filing should be addressed to the email enquiries@companieshouse.gov.uk. If for any reason a company is not able to file their return on time, it is recommended to apply for a 3 months extension to the deadline, if the filing date has not yet passed. In case a company does not apply for an extension and file their accounts late, it would be possible to appeal against the late filing penalty on the grounds of poor health or exceptional and unforeseen circumstances.
Further information about how to apply for an extension can be found on gov.uk website.
Contact UK Accountant if you need more advice on your VAT matters or VAT registration in the EU or the UK.
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