|VAT Returns, payments, assessments, debts and disclosures|
|VAT Returns & Payments After 20 March 2020|| |
You should continue to submit VAT returns on time. However, payments of VAT due between 20 March and 30 June 2020 can be deferred until 31 March 2021 without incurring interest or penalties. HMRC has clarified that this will also apply to overseas businesses which have VAT obligations in the UK.
Businesses and charities wishing to take advantage of this deferral do not need to request permission or inform HMRC. However, care should be taken to ensure that any Direct Debit instructions which are in place are cancelled to prevent payment being taken automatically.
If the VAT return is submitted late, a central assessment may still be issued by HMRC. Updated guidance has been published about the impact of COVID-19 measures on reasonable excuse, appeals and penalties. For COVID-19 issues, HMRC will give you an extra 3 months to appeal any penalty dated February 2020 or later. Read more here
This measure does not cover VAT MOSS or import VAT, both of which must continue to be paid as normal.
|VAT debts arising before 20 March 2022|
There have been no special measures introduced relating to VAT debts which arose before the 20th March. However, HMRC has set up a dedicated Coronavirus helpline to assist taxpayers with outstanding tax liabilities they are struggling to meet. HMRC’s COVID-19 Guidance for Employers indicates that taxpayers struggling to meet their obligations as a result of the current situation regarding COVID-19 may be able to agree a bespoke “Time to Pay” (TTP) arrangement. The number for this helpline is 0800 0159 559.
TTP must be requested from HMRC and it will be granted at their discretion. When an application is received, HMRC is likely to ask about the recent income and expenditure of the business and any plans which are in place to get the business back on track and to meet its financial obligations. It is helpful to have a good compliance history in this negotiation process, but it is not essential; each case will be decided on its own facts. If a business can demonstrate an inability to meet its entire VAT liability up front, but that it would be able to meet the obligation if given extra time, then HMRC may still accept an application.
|VAT Repayments|| |
HMRC has announced that it will offset VAT repayment claims against VAT debts that a business had accrued before the COVID-19 related VAT deferral measures were introduced.
It will not be offsetting repayment claims against VAT liabilities that have been deferred under the new arrangements. This means that businesses that defer VAT payments should obtain VAT refunds due in subsequent periods.
If your business or charity is a “repayment trader” (it recovers more VAT than it pays), you may wish to consider switching to monthly VAT returns in order to accelerate the rate at which input VAT can be recovered.
|Disclosures and assessments|| |
The deferral measures do not apply to VAT assessments and voluntary disclosures which must still be paid in accordance with HMRC’s regular rules.
On a cautionary note, we have already seen indications that HMRC may have advised its staff to raise assessments immediately based on HMRC’s “best judgement” of the sums due rather than delay until a situation has been fully resolved and liabilities agreed. This means that clients with open enquiries/disputes may start to receive VAT assessments that are incorrect or wildly inaccurate.
If businesses have open enquiries but have not yet received an assessment it may be prudent to consider whether there are steps that could be taken to:
· prevent an assessment being raised; or
· ensure that any assessment HMRC issues is not inaccurate so as to reduce the risk of costs on a future dispute.
If you have any concerns on this particular point please reach out to your usual Constable VAT contact.
|Making Tax Digital for VAT|| |
HMRC has announced that, due to the impact of COVID-19, taxpayers now have until their first VAT return period starting on or after 1 April 2021 to put digital links in place. The previous deadline was 1 April 2020.
|Administrative changes and relaxations|
|Option to tax|| |
As a result of COVID-19, it has been difficult to notify HMRC about options to tax. Taxpayers now have 90 days to notify HMRC of an option to tax, rather than the usual 30 days. This applies to elections being made between 15 Feb and 31 May. HMRC will also accept electronic signatures in certain cases. The Guidance can be read here.
|Export Evidence|| |
HMRC has released guidance to assist businesses which may struggle to meet the time limit for removing the goods from the UK which must be met in order for the export to be zero-rated. The guidance details when HMRC may waive the formal requirements and can be read here.
|Submission of non-statutory clearances|| |
Due to COVID-19, HMRC are currently unable to process applications for Non-Statutory Clearances which are made by post. Applications should be submitted to email@example.com
|VAT liability changes and considerations and measures for specific sectors|
|Zero rating for PPE|| |
HMRC has released a Brief announcing changes to UK VAT, introducing a temporary zero rate for supplies of PPE for use for protection from COVID-19. The zero-rate applies from 1 May to 31 July 2020. Revenue & Customs Brief 4 (2020) contains the details on what types of goods are considered PPE.
|Receipt of government grants|| |
The COVID-19 grants announced by BEIS are outside the scope of VAT so no output VAT is due on this income. The grant income should be disregarded for the purposes of the VAT registration and deregistration thresholds.
If you have received other grants or are uncertain regarding the liability of any grant funding and its impact on input VAT recovery please seek further guidance
HMRC has announced that the zero-rate for electronic publications, originally intended to take effect from 1 December 2020, will now be applicable from 1 May 2020. The types of publication which qualify for the zero-rate are listed in HMRC’s Guidance.
|Heath Professionals|| |
HMRC has updated VAT Notice 701/57: Health Professionals & Pharmaceutical Products, adding EEA health professionals to the list of “relevant practitioners” for the purposes of zero-rating certain supplies.
HMRC have published COVID-19 advice in VAT notice 700/44 for barristers and advocates.
|Constable Blogs and resources|
|Cash Flow Considerations|| |
The VAT Cash Accounting Scheme is available to some taxpayers and allows payment and recovery of VAT based on payments rather than invoices. This can be useful for cash flow if customers are slow to pay and your organisation pays more VAT than it recovers.
By creating VAT liabilities only when a payment is actually received, the Cash Accounting Scheme removes the requirements to calculate and apply Bad Debt Relief where customers do not pay. This provides an administrative easement as well as a cash flow benefit. The downside to the Scheme is that input VAT on a purchase invoice cannot be recovered until you pay your supplier.
To be eligible for the scheme, the estimated taxable turnover for the business in the next 12 months must not exceed £1.35million.
|Has Your Business Changed as A Result of COVID-19?|| |
Many businesses and charities are currently adapting their usual business practices in response to the COVID-19 outbreak measures. Some are seeking to improve cash flow and are taking various measures to do so including diversifying from their normal business activities. Whilst business development and sales diversification can certainly create additional income, it is necessary to consider the potential VAT impacts.
Constable VAT has prepared a document on the VAT consequences of some of the changes which businesses may be making to their usual business activities. This can be viewed here.
|Major VAT Announcement 9 July 2020||The Chancellor made some important announcements regarding VAT in his ‘A Plan for Jobs’ Speech earlier today. We have summarised these here.|
|Does The Temporary Reduced Rate Apply to Me?||On 8 July 2020, the government announced that it would introduce a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions. This cut in the VAT rate from the standard rate of 20% is effective from 15 July 2020 to 12 January 2021.|
Since the introduction of this temporary reduced rate, we have been asked many questions and there is some confusion as to when it actually applies. This piece discusses the Guidance as it stands and aims to assist taxpayers in identifying the key points to consider.
|Wedding Packages and The Temporary Reduction||Constable VAT has received enquiries from many businesses asking about how the temporary reduced rate of VAT for certain supplies of hospitality, hotels and holiday accommodation applies to their operations. One of the most common areas of confusion is in relation to wedding packages.|
This piece discusses how the temporary reduced rate interacts with wedding packages.
|Extension to Reduced Rate for Hospitality||In July, the Government announced a temporary VAT cut for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions which was to apply in the UK from 15 July 2020 until 12 January 2021.|
This measure aims to support businesses and jobs in the hospitality and tourism sector. In recognition of the extra assistance which establishments such as restaurants, pubs, bars and cafés to deal with the effects of the ongoing restrictions, this reduction has been extended until 31 March 2021. Read our analysis here.
|Imports and Duty Deferment and international matters|
|Import VAT|| |
Duty deferment account holders who were experiencing severe financial difficulty as a result of Covid-19 and were unable to make payment of deferred customs duties and import VAT due on 15 April 2020 and/or 15 May 2020 were able to apply to HMRC for approval to enter into an extended period to make full or partial payment, without having their guarantee called upon or their deferment account suspended.
Duty Deferment account holders will be able to use their accounts during the extended payment period agreed unless they default on a subsequent payment in that period, in which case HMRC may consider suspending their account. The outstanding payment will not affect their duty deferment limit so they will not need to increase their guarantee to cover the outstanding payment. Where HMRC agree to an extended payment period, interest will not be charged on the outstanding payments provided they are paid in full by the agreed date.
To request a deferral the account holder should contact the Duty Deferment Office 03000 594243 or by email firstname.lastname@example.org or the COVID-19 helpline on 0800 024 1222. Account holders will be asked to provide an explanation of how Covid-19 has impacted their business
|Trading in other countries?||Other European countries have also implemented various measures to assist in reducing the financial consequences.|
Our coverage aims to provide a synopsis of the VAT related measures being taken in different Member States to aid those struggling to meet financial obligations.
We have not confirmed the measures directly with all of the tax authorities concerned and local advice/confirmation is recommended. The situation is so fluid that changes and additional measures can be anticipated. We will try to keep this information up to date.