All VAT registered businesses have an automatic VAT payment holiday for the period from 20 March to 30 June. The VAT due between those dates does not have to be paid until around 31 March 2021, but exactly when the deferred payment will become due is to be clarified.
Where the business pays VAT by direct debit (DD), it must cancel its DD to take advantage of the VAT deferment. This needs to be done at least 5 working days before the payment is due to be taken. HMRC cannot cancel the DD from their end, and the VAT reported on the VAT return will be taken automatically if the DD is not cancelled.
Businesses who pay the VAT by electronic transfer can simply not make the payment due in the period. They do not have to inform HMRC why the payment is not made.
HMRC’s systems should be adjusted so that default surcharges are not trigged by payments not arriving in the 20 March to 30 June period. We understand that HMRC will not charge interest on the deferred VAT payments, but that is to be clarified.
The VAT return must still be submitted on time. Where the business is due a VAT repayment it is even more important to get the return in on time, as the repayment will be accelerated to business.
Self-employed individuals and partners will have a payment on account (POA) to make on 31 July 2020, for the tax year 2020/21. This POA can be reduced by the taxpayer making an adjustment in their personal tax account, or by using form SA303. However, this is not necessary for the POA due on 31 July 2020, as HMRC is providing an automatic payment holiday.
As with VAT, where the income tax is normally paid by direct debit that DD must be cancelled or the tax will be taken.
This tax payment holiday only applies to anyone who has to make a POA on 31 July 2020, including employed taxpayers who may be making a POA because of tax due on dividends or other income.