As a business, you should be well aware by now that VAT deferral was introduced earlier this year to help small businesses cope with the economic fallout of the Coronavirus pandemic. To reiterate, VAT payments were deferred for the 20th March – 30th June 2020 period.
If you’re one of the businesses subject to VAT deferral, it’s important you’re aware of what this means for you, and how and when you can pay your VAT within the new guidelines.
Key facts on COVID-19 UK VAT deferral
You have two options to pay your deferred VAT, as follows:
– Pay now in full: Your business VAT should be paid in full by the 31st March 2021, i.e. the end of the tax year.
– Plan to opt-in to HMRC’s VAT deferral payment scheme: Your business VAT can be paid in small monthly interest-free instalments, extending up to April 2022.
We’d recommend speaking to an accountancy firm in order for guidance if you’re unsure of which option is best for your business. It’s worth being aware, though, that if you are planning to utilise the VAT deferral payments scheme, you should:
– Be prepared to opt-in by the end of this upcoming March, with opt-in open from early 2021.
– Not have any outstanding scheduled VAT returns due at the point of opting-in outside of your deferred VAT.
– Be prepared to pay your first deferred VAT instalment by the end of March 2021 by Direct Debit.
The introduction of the payment scheme is particularly beneficial for small businesses who have been hit especially hard by the COVID-19 lockdown, such as those in hospitality. As the deferral payment scheme enables these businesses to split owed VAT into up to 11 payments, it significantly reduces the once-annual hit business finances take when paying tax in “normal” circumstances.
Speak to professional accountants for guidance
CWR Accountants can help you to feel confident about adhering to the VAT deferral in the manner best suited to your business accounts. For all VAT guidance, accounting services and COVID-19 tax compliance understanding, get in touch with CWR Accountants in Lancaster today.