The COVID-19 pandemic has upended UK Government rules and regulations on a whole raft of important areas. The massive bailout of business, individuals and the self-employed highlights the damage that this pandemic will do to the wider economy without adequate state support. To help prevent this damage, the Government has announced a selection of payment delays on Self-Assessment and VAT.
The Government has announced that all VAT payments due before June 30th, 2020 will now not be requested until March 31st, 2021. Self-Assessment payments due on the 31st of July 2020 will now not need to be paid until January 31st, 2021. Furthermore, there is no need to make an application but HMRC does ask people to cancel direct debit mandates. This affects payments and means tax returns need to be filed on time.
VAT – The Details
Value Added Tax deferrals on payments now apply from March 20th, 2020 until June 30th, 2020. All UK businesses are eligible but other VAT payments, like MOSS payments, are not part of this scheme. HMRC also states that this scheme includes “non-established businesses registered for VAT in the UK.” What this means, in reality, is that one-quarter of VAT has been deferred. The payment due on April 7th or June 7th or any other monthly payments due on any of these dates is now deferred for one quarter. This also means that the deferral will also apply to payments on account as well. These payments, which are usually due on the last day of the second and third months in any VAT quarter for those businesses affected. Now, consequently, payments on account which are due to be paid on March 31st, April 30th, May 31st, and June 30th can now be deferred for a whole quarter.
HMRC are advising individuals and businesses to cancel their direct debit mandates as soon as possible. These mandates will need to be canceled before payment is due to be collected as the bank might not have enough time to cancel the direct debit payment. Thereafter, businesses or individuals will have up until March 31st, 2020 to pay any and all liabilities that have accumulated during the deferral quarter and to make arrangements to pay this sum in total by the deadline date.
Self-Assessment – The Details
The Government has also announced the deferral for income tax self-assessment for the second payment on account for the 2019/20 period which will be due on July 31st, 2020 which will henceforth be delayed until January 31st, 2020. This will be applied automatically by HMRC and no application is necessary. When this was first announced there was some confusion about whether it applied to any and all taxpayers, but this confusion has been cleared up by the Treasury and now applies to all taxpayers. However, you may need to consider whether paying now might help you by reducing future payments? If you can afford to pay, you can. But you can also defer.
Not many individuals pay self-assessment via direct debit. This is because the HMRC system requires an individual mandate to be created for each individual payment and this can be cumbersome for self-assessment taxpayers. However, if you have a direct debit payment set up for the 31st of July 2020 payment of account then you should contact your direct debit mandate holding bank and cancel the payment.
Another handy tip from this deferral is that self-assessment returns should be filed by their due date and it could be helpful to file your 2019/20 return as soon as possible after April 5th, 2020. This can help create the planning framework for tax liabilities for January 2021 and help to define any loss of relief and refund payments due.
At Prestige Business Management we can help. Our clients understand we go that extra mile and in the current uncertain times we live in we can help by providing stability and support. Why not get in touch with Prestige Business Management today on 0203 773 2927. Why not call us today to talk about self-assessment and VAT COVID-19 payment deferrals.