- the government is deferring VAT payments for the next quarter. That means businesses will not pay any VAT from now through to the end of June.
- businesses will have until the end of the financial year to pay back any deferred taxes. This is to help support businesses with their cash flows, and support individuals’ employment.
- over a million businesses of different size and sector are expected to benefit. This is an automatic offer with no applications required.
How does it work?
- these are automatic offers using HMRC’s existing systems with no applications required. No penalties or interest for late payment will be charged.
Who are we helping?
- no business will have to make a VAT payment to HMRC in that period. This benefits VAT-registered businesses of all size and sector.
- millions of self-employed taxpayers would benefit from the Income Tax Self-Assessment deferral. Those with significant amounts of income from dividends and property income will also benefit.
When will the deferral apply?
- for the self-employed, the deferral will apply for ITSA payments due in July.
- VAT for all companies in the UK will be deferred immediately until mid-June – with no business having to make a VAT payment during this period. Companies will then have until the end of the tax year to pay the tax owed, allowing them time to recover.
How much cash benefit will businesses get from this?
- the cash benefit will vary depending on the size of individual businesses payroll, but it is expected to provide a short-term cash flow boost to those businesses that have been impacted by COVID-19.
What happens after the VAT deferral ends?
- businesses will be given until the end of the 2020-21 financial year to pay off the debts they have accrued.
You’re deferring tax, not voiding it – companies will still have to pay this tax back. Isn’t this just another loan?
- this will help alleviate the immediate, temporary pressures businesses are facing. We are confident the economy and businesses will bounce back from this in time. To help them do that, we will give them the time needed to pay back deferred tax. Businesses will have until the end of the FY to make these repayments.
- HMRC are also delivering an enhanced Time to Pay offer to fit the specific impacts of Covid-19. Time to Pay is available to all firms and individuals who are in temporary financial distress as a result of Covid-19 and are unable to pay their tax on time or have existing liabilities. HMRC have set up a dedicated helpline to enable those eligible to get practical help and advice.
- these tax deferrals are just part of the package the government is announcing to support businesses. The government has also announced a comprehensive wage subsidy scheme. Tax deferral will help businesses with cashflow in the meantime.
Why are you not also deferring corporation tax?
- paying Corporation Tax is conditional on making trading profits. The reality of the situation is that many businesses will not make profits in the next months but will have ongoing costs related to wages. VAT deferral will help address this and provide the much-needed liquidity to businesses.