HMRC’s announcement confirms that any VAT payments due for the period to 30 June 2020 can be deferred, but any payments falling due after this will need to be made. For example, for organisations who do not make VAT payments on account, the May VAT return payment is due by 7 July. This falls outside of the VAT deferral period and so organisations will need to ensure that the VAT return is submitted and payment of the VAT liability is made by the deadline to ensure it does not incur any penalties.
Many organisations have cancelled their direct debits with HMRC in order to defer VAT payments during this period. Therefore where these have been cancelled, organisations should reinstate these in good time for HMRC to take the payment. For those organisations who may struggle to make payment of the full amount owing, they should contact HMRC’s Time to Pay team to see whether a payment plan can be agreed.
Where organisations have chosen to defer VAT payments, they should ensure that the balance is paid to HMRC by 31 March 2021. Please note, payment of the deferred VAT can be made in instalments or in full, so long as the full amount is paid by the deadline.
For more information on this please see HMRC’s article, or alternatively read our insight on other government support for organisations during the coronavirus.
It was announced in the Budget 2021, that a penalty totalling 5% of any VAT still outstanding for payment at 31 March 2021 will be charged if that organisation had not opted into the new payment scheme or made an alternative arrangement to pay by 30 June 2021. This penalty will apply instead of the normal default surcharge regime.
Organisations need to ensure they have decided how to manage the VAT that was deferred. An application has to be made to access the new payment scheme – it is not an automatic enrolment system. As such, doing nothing is not an option and will likely result in a 5% penalty.
If you would like to discuss this issue further, please contact Robert Marchant or your usual Crowe contact.