Tax measures new and old can help blunt the economic challenges arising from Covid-19 measures, particularly cashflow, write advisers at Markel Tax.
Details are still being worked on by HMRC at the time of writing (24 March 2020), but support that businesses can seek in this difficult period through the tax system includes:
Businesses can now defer their VAT payments to HMRC which will aid cashflow. The government’s announcement provided little detail.
Deferment of VAT payments is effective immediately. Businesses should cancel their VAT direct debits to HMRC now, otherwise payments will still be taken automatically. These VAT direct debits should be restarted after 30 June 2020 (though the period could be extended, watch for HMRC announcements).
The deferment applies to VAT payments due to be made to HMRC between 20 March 2020 and 30 June 2020 (rather than relating to VAT returns covering this period or the tax point of a transaction, etc.) and these payments will instead fall due at the end of the tax year. HMRC has said that 'tax year' in this context means 31 March 2021, but look for announcements in case this is set according to VAT return stagger.
HMRC says that interest will not be applied to the deferred VAT payments. It is hoped that HMRC will also not apply default surcharges or increase default surcharge periods/rates as the result of deferment.
Any VAT due for payment after 30 June 2020 will still have to be paid to HMRC (as things stand, but watch for official announcements).
However, VAT returns must still be submitted on time: it is only the payment which is deferred. Since VAT refunds and reclaims will be paid by the government as usual, if a business is due to receive a repayment in its next VAT return, submit that VAT return as early as possible and opting for monthly VAT returns should also be considered.
The VAT liability stated in box 5 of the VAT return and payable to HMRC within the specified period will be deferrable.
HMRC is saying that payment on account instalments and annual accounting payments can also be deferred where the due date falls between 20 March 2020 and 30 June 2020.
It is understood that MOSS payments are still to be paid as these liabilities are properly due to other EU member states.
HMRC is required by law to issue assessments within specified timeframes and is therefore issuing these, but receiving an assessment does not mean it should be paid immediately. HMRC is currently inconsistent as to whether VAT amounts payable as the result of an assessment are also deferrable when the due date falls in the specified period. In the absence of a clear deferment of assessed VAT liability, prompt action is required as the deadline for appeals is 30 days (although the tribunals and HMRC are making announcements as to deadlines too).
HMRC is also currently inconsistent as to whether they might accept deferral of the payment instalments under a time to pay arrangement. Even if deferment is agreed in relation to any VAT payments, we have been alerted that HMRC’s Debt Management Unit might still try to chase for payment and should be contacted on 0300 200 3838. Applying for hardship (deferring payment of VAT under appeal) should also be considered when appeals have been submitted to tribunals.
Although payment of VAT on imports can be described as a VAT payment due to HMRC, VAT on importation is currently payable as usual and is not deferred, as with any other transaction.
Entitlement is automatic, no application is required. All UK businesses are eligible.
HMRC is still working on its policy regarding non-UK businesses, but it is hoped that any business with a UK VAT liability will be able to defer this.
To support self-employed individuals throughout this time, the chancellor has announced that payments under income tax self-assessment, normally due on 31 July 2020, will be deferred until 31 January 2021.
During this period, individuals will not be charged any penalties or interest for late payment.
The deferral will apply automatically to all. Taxpayers who believe that their 2019/20 income will be lower than their 2018/19 income can make a claim to reduce their payments on account.
Individuals and companies who believe that they may be entitled to a tax repayment in respect of the 2019/20 tax year may wish to submit their tax returns earlier rather than later to accelerate any repayment.
If you are unsure of whether you are due a repayment, it may still be worth preparing the returns to establish if any repayment is due. If no repayment is due, the returns can always be submitted later in the year.
Time to pay arrangements can be negotiated with HMRC to stagger VAT liability payments across a longer period of time.
The government announced in the Budget 2020 that time to pay arrangements would be relaxed. Such an arrangement should be sought if taxpayers have problems making VAT or any other payments which cannot be deferred.
For VAT liabilities (as noted above), HMRC is currently inconsistent as to whether it might accept deferral of the payment instalments under a time to pay arrangement. Even if deferment is agreed in relation to any VAT payments, we have been alerted that HMRC’s Debt Management Unit might still try to chase for payment and should be contacted on 0300 200 3838.
Cashflow can be aided through tax relief against qualifying R&D expenditure. Such relief would provide a welcome boost at an important time. With the 31 March 2020 deadline fast approaching, there may be a number of businesses that could miss out on a year’s worth of R&D expenditure and a relief of up to 33% if they are not contacted as a priority. The absolute deadline for 31 March 2018 claims is 31 March 2020.
Kevin Hall (VAT), Nicola Goldsmith (income tax) & Justine Dignam (R&D), Markel Tax
Tax measures new and old can help blunt the economic challenges arising from Covid-19 measures, particularly cashflow, write advisers at Markel Tax.
Details are still being worked on by HMRC at the time of writing (24 March 2020), but support that businesses can seek in this difficult period through the tax system includes:
Businesses can now defer their VAT payments to HMRC which will aid cashflow. The government’s announcement provided little detail.
Deferment of VAT payments is effective immediately. Businesses should cancel their VAT direct debits to HMRC now, otherwise payments will still be taken automatically. These VAT direct debits should be restarted after 30 June 2020 (though the period could be extended, watch for HMRC announcements).
The deferment applies to VAT payments due to be made to HMRC between 20 March 2020 and 30 June 2020 (rather than relating to VAT returns covering this period or the tax point of a transaction, etc.) and these payments will instead fall due at the end of the tax year. HMRC has said that 'tax year' in this context means 31 March 2021, but look for announcements in case this is set according to VAT return stagger.
HMRC says that interest will not be applied to the deferred VAT payments. It is hoped that HMRC will also not apply default surcharges or increase default surcharge periods/rates as the result of deferment.
Any VAT due for payment after 30 June 2020 will still have to be paid to HMRC (as things stand, but watch for official announcements).
However, VAT returns must still be submitted on time: it is only the payment which is deferred. Since VAT refunds and reclaims will be paid by the government as usual, if a business is due to receive a repayment in its next VAT return, submit that VAT return as early as possible and opting for monthly VAT returns should also be considered.
The VAT liability stated in box 5 of the VAT return and payable to HMRC within the specified period will be deferrable.
HMRC is saying that payment on account instalments and annual accounting payments can also be deferred where the due date falls between 20 March 2020 and 30 June 2020.
It is understood that MOSS payments are still to be paid as these liabilities are properly due to other EU member states.
HMRC is required by law to issue assessments within specified timeframes and is therefore issuing these, but receiving an assessment does not mean it should be paid immediately. HMRC is currently inconsistent as to whether VAT amounts payable as the result of an assessment are also deferrable when the due date falls in the specified period. In the absence of a clear deferment of assessed VAT liability, prompt action is required as the deadline for appeals is 30 days (although the tribunals and HMRC are making announcements as to deadlines too).
HMRC is also currently inconsistent as to whether they might accept deferral of the payment instalments under a time to pay arrangement. Even if deferment is agreed in relation to any VAT payments, we have been alerted that HMRC’s Debt Management Unit might still try to chase for payment and should be contacted on 0300 200 3838. Applying for hardship (deferring payment of VAT under appeal) should also be considered when appeals have been submitted to tribunals.
Although payment of VAT on imports can be described as a VAT payment due to HMRC, VAT on importation is currently payable as usual and is not deferred, as with any other transaction.
Entitlement is automatic, no application is required. All UK businesses are eligible.
HMRC is still working on its policy regarding non-UK businesses, but it is hoped that any business with a UK VAT liability will be able to defer this.
To support self-employed individuals throughout this time, the chancellor has announced that payments under income tax self-assessment, normally due on 31 July 2020, will be deferred until 31 January 2021.
During this period, individuals will not be charged any penalties or interest for late payment.
The deferral will apply automatically to all. Taxpayers who believe that their 2019/20 income will be lower than their 2018/19 income can make a claim to reduce their payments on account.
Individuals and companies who believe that they may be entitled to a tax repayment in respect of the 2019/20 tax year may wish to submit their tax returns earlier rather than later to accelerate any repayment.
If you are unsure of whether you are due a repayment, it may still be worth preparing the returns to establish if any repayment is due. If no repayment is due, the returns can always be submitted later in the year.
Time to pay arrangements can be negotiated with HMRC to stagger VAT liability payments across a longer period of time.
The government announced in the Budget 2020 that time to pay arrangements would be relaxed. Such an arrangement should be sought if taxpayers have problems making VAT or any other payments which cannot be deferred.
For VAT liabilities (as noted above), HMRC is currently inconsistent as to whether it might accept deferral of the payment instalments under a time to pay arrangement. Even if deferment is agreed in relation to any VAT payments, we have been alerted that HMRC’s Debt Management Unit might still try to chase for payment and should be contacted on 0300 200 3838.
Cashflow can be aided through tax relief against qualifying R&D expenditure. Such relief would provide a welcome boost at an important time. With the 31 March 2020 deadline fast approaching, there may be a number of businesses that could miss out on a year’s worth of R&D expenditure and a relief of up to 33% if they are not contacted as a priority. The absolute deadline for 31 March 2018 claims is 31 March 2020.
Kevin Hall (VAT), Nicola Goldsmith (income tax) & Justine Dignam (R&D), Markel Tax
