The VAT payment holiday window ends on 30 June, and normal payment dates resume from 1st July. What should you do if you can’t pay the VAT due by 7th July, because of the impact of Covid-19 on your trading situation?

Payment Support Service (PSS)
The priority is to contact the PSS at HMRC before the VAT is legally due for payment. Any time to pay agreement won’t then be subject to a default surcharge (penalty). Before you call the PSS, ensure you have your VAT number and bank account details to hand. Also be clear about the amount of VAT that is outstanding and your proposals to settle the arrears.

The HMRC officer you speak to will also require details about why you cannot pay on time. A partial payment on time will improve your position with HMRC.

Contact details for the PSS: 0300-200-3835, open 8am to 4pm Monday to Friday.

Reasonable excuse
The concept of reasonable excuse has always been a key part of the VAT system. It has been the subject of many tribunal hearings over the years because it is not clearly defined in law. In the VAT world, it is relevant when a business has missed a deadline, e.g. filing a return, registering for VAT on time, paying tax or replying to an information notice.

The HMRC guidance on reasonable excuse now includes a paragraph that is specific to the impact of the virus: “HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations (such as payments or filing dates). Explain how you were affected by coronavirus in your appeal. You must still make the return or payment as soon as you can”.

Extra three months to appeal
More good news is that taxpayers notified of any HMRC decision that is dated February 2020 or later will be given an extra three months to appeal the decision if they think it is wrong.

For example, an officer’s VAT assessment raised on 31 March and subject to a 30-day appeal deadline, must be appealed by 31 July rather than by 30 April. This appeal extension recognises that many businesses might not have been able to appeal while key staff was working remotely.

Cashflow
If you have taken advantage of the VAT holiday payment window, and pay your VAT by direct debit, don’t forget that you must reactivate the direct debit mandate with your bank after 30 June.

Any cashflow projections need to include the 31 March 2021 deadline for settling the VAT deferred during the payment holiday window.

HB Accountants are accountants for business – we are working hard helping our clients’ to make the right decisions for their business.

If you would like our help on financial, accounting or tax guidance and support, please contact Karen or Keith or call 01992 444466.