UK 300,000 businesses face 7 July VAT bill
- Jul 6, 2020 | Richard Asquith
HMRC has confirmed that it ended its three-month VAT payments holiday on 30 June 2020. This means over 300,000 VAT registered businesses will have to face their first VAT payment deadline on 7 July. In May 2020, VAT receipts went £0.6billion negative compared to payments of £11billion in May 2020.
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In July 2019, HMRC’s VAT receipts were £13.6 billion. The likely revenues for July 2020 are likely to be considerably down from this given the widespread shut down of retail activities. However, businesses-to-business VAT receipts will still fall due.
Failure to meet the deadlines – including businesses reinstating their suspected direct debit payment orders to HMRC – may result in a surcharge of up to 15% of the VAT due, plus a further charge of up to 100% for any inaccuracy in the return.
Whilst most businesses have not been trading since March’s lockdown, the timing will be brutal as they start to re-open with lockdown easement. The fiscal management on pulling this may not be optimal since employers will have to start contributing to their furloughed workers’ pay from August.
VAT deferment scheme helps
HMRC’s VAT deferral scheme was launched on. It gives businesses the option to postpone VAT payments due between 20 March and 30 June. Any unpaid VAT must be paid by 31 March 2021 at the latest. There are no late payment fines or interest charges during this period. HMRC forecast the measure would result in £30 billion in deferred VAT payments.
The IFS estimates that some 5% of deferred VAT will never be repaid as businesses go into insolvency. This would amount to £1.9 billion in lost revenues.
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