What VAT help is available to the travel sector?

In these exceptionally difficult times, what help is there when you have a VAT bill to pay?

First of all, if your business needs time to pay for VAT (and PAYE and Corporate Tax also) then make use of the Government's dedicated helpline (0800 0159 559) for gt advice and try to agree a time to pay arrangement, spreading the payment over, for example, 6 months.

Deferral of VAT

In March 2020 HMRC announced that all VAT registered businesses in the UK could defer paying their VAT liabilities during the period 20 March 2020 to 30 June 2020. There is no need to speak to HMRC to arrange or agree this - it applies automatically.

What does this mean for my business

  • Businesses with a VAT payment due in this period will not need to make that payment to HMRC.
  • Whilst the guidance does not explicitly state that there will be no penalties for late payment of VAT it does for income tax –“No penalties or interest for late payment will be charged in the deferral period”. There isn’t an interest regime for late payment of VAT returns – only the possibility of default surcharges. These cannot apply where the government has announced a deferral period.
  • This affects the following VAT return periods:
    • 02/20 period ending 29 February.
    • 03/20 period ending 31 March.
    • 04/20 period ending 30 April.
  • Amounts due during this deferral period must be fully paid by 31st March 2021. The VAT liability can be paid at any time before this date.

What happens if I am a large business on payments on account?

  • You will not be required to pay your monthly instalments during the deferral period, for the above VAT periods or for period 05/20.
  • There have been conflicting views from HMRC about whether the balancing payment for 05/20 which is due on 30th June will be covered by the deferral scheme.
  • Until there is further direction from HMRC, the taxpayer can only be guided by the statement made by the Chancellor which includes 30th June payments. This may give an unfair advantage to large businesses on these VAT staggers.
  • We recommend that large businesses in this position take into account the possibility of changes to these dates when they are forecasting cashflows for the 05/20 balancing payment.
  • If your turnover has been severely affected, discuss the possibility of reducing your POA’s with HMRC for the remainder of the year.

Is there anything else I should know?

  • We recommend that all businesses continue to prepare their VAT returns and submit them on time. This is to protect against the default surcharge regime after the deferral period.
  • If you pay by direct debit please cancel it, as HMRC will not automatically defer the payment for you. They will still try to collect it.
  • If the return is a repayment and you are expecting a refund from HMRC they will process it as normal. We recommend repayment returns are submitted as early as possible after the period end.
  • If you or HMRC later find that you have underdeclared VAT relating to a deferred period, then payment of it should also qualify for deferral. However you will probably need to contact HMRC's Debt Management Unit to secure it.
  • If you need to submit an estimated return then HMRC’s permission is required. The easiest way to get this is via HMRC's webchat. Estimating a return without approval will be considered an error but HMRC are promising a light touch on penalties.
  • Central assessments are not being issued by HMRC during the deferral period

Please get in touch if you need help.

Sue Rathmell

MHA MacIntyre Hudson

Tel: 03330 100220