COVID-19: VAT payment deferral

Last updated 27 April 2020

To support businesses during the COVID-19 crisis, the Government announced on 20 March that VAT payments will be deferred for three months.

This deferral:

  • is available to all UK VAT registered businesses (including non-established taxable persons);
  • will apply to payments due between 20 March 2020 and 30 June 2020 (except for VAT MOSS payments which are not covered); and
  • is automatic, with no application or notification of HMRC required (but businesses who pay by direct debit need to take action – see below).

Businesses will not be required to make VAT payments during the deferral period, and will instead be given until 31 March 2021 to pay any liabilities which accumulate.  HMRC will not charge interest or penalties on any amount deferred as a result of this announcement. VAT refunds and reclaims will continue to be processed as normal.

The practical effect of this is that payments for returns for the quarters ended 29 February 2020 (if not already paid by 20 March 2020), 31 March 2020 and 30 April 2020 will not have to be paid until 31 March 2021.

HMRC’s guidance on annual accounting payments and payments on account has been updated to confirm that, where these are due between 20 March 2020 and 30 June 2020, they can also qualify for deferral.

If a payment on account due between 20 March 2020 and 30 June 2020 is deferred, but the balancing payment is outside of these dates, the amount payable is the balancing payment less any deferred payments. Deferring payments will not create a repayment.

HMRC have informed us that the following will not qualify for deferral:

  • Payments of import VAT, Customs Duties or other taxes (such as Insurance Premium Tax, Machine Games Duty etc.) unless covered by another Government announcement.
  • VAT due to be paid in relation to disclosures and assessments due to HMRC.
  • Time To Pay (TTP) arrangements for payments due before 20 March 2020.

Where businesses are struggling to pay these amounts on time, HMRC recommend contacting the dedicated COVID-19 TTP helpline on 0800 024 1222.

During the deferral period, VAT returns must still be filed, and the normal filing deadlines continue to apply.

VAT refunds and reclaims will also continue to be processed as normal.  If a business defers a payment and then submits a repayment claim in a later quarter, HMRC have indicated that they will offset that repayment against existing debt from before the deferral period (in the normal way), but will not set it against any deferred VAT payments. 

We continue to raise issues with HMRC regarding the practical scope and application of this deferral and will update this page as more information becomes available. More information can also be found in HMRC’s guidance on GOV.UK.

Important information for direct debit payers

HMRC have confirmed that they will not be automatically suspending collection of direct debit payments during the period.

Instead, businesses who normally pay by direct debit and who wish to defer their VAT payment need to contact their bank to cancel their mandate.  This should be done in sufficient time to ensure HMRC do not attempt to collect payment. 

Businesses will then also need to remember to set up a new direct debit mandate once the deferral period is over.