Confusion on COVID-19 VAT 3-month postponement

On 20 March, the Chancellor, Rishi Sunak, announced no UK business would have to pay VAT until after 30 June 2020.  However, the measure has left many of the 2 million affected businesses confused on repayment, any interest charges and the direct debit process. Follow Avalara’s live  global coronavirus Covid-19 VAT measures tracker.

Up to 400,000 UK businesses were expecting to pay £13 billion VAT at the end of March alone. So the VAT holiday is a huge relief. But the questions around repayment dates and interest charges is confusing, and this is making many nervous. Also, over 100,000 non-UK businesses have been left behind.

Unanswered questions from businesses:

• Whilst HRMC has said any deferred VAT will only be due by the end of the financial year, 31 March 2021, VAT payments do not follow this cycle. Most businesses pay when their quarterly VAT returns are due. So around two-thirds of businesses are uncertain if they what extra time they will get to pay.
• HMRC has not referred to late interest being waived on any deferred VAT. The HMRC charge on late tax payments is currently 3.25%. It’s likely that the government will relax the late interest – but lack of confirmation may stop businesses taking up the offer.
• Thousands of businesses are on Direct Debit payments, with HMRC taking VAT liabilities automatically. It is not clear if HMRC will stop this process or if businesses must contact HMRC to confirm they wish to defer.
• Micro-businesses on special schemes, such as annual VAT payment, may not receive any benefits.