Rural businesses which have made use of HMRC’s coronavirus VAT payment holiday should reinstate their direct debits before the scheme closes, accountants have warned.
The scheme was introduced on 21 March 2020 as the UK went into lockdown, to help ease financial difficulties caused by the coronavirus pandemic.
It allowed farmers and rural businesses to defer quarterly VAT payments until 31 March 2021.
However, no further VAT bills can be deferred after the scheme cut-off on 30 June 2020.
Help and advice summary
- VAT payment holiday ends on 30 June
- Reinstate VAT direct debits before the deadline
- The self-assessment July payment deferral until 31 January remains
- If possible make the July payment to relieve financial pressure in 2021
- Businesses still in difficulty should contact HMRC immediately
- Further advice is available on the HMRC website:
Sean McGinness, a tax specialist and partner at accountancy firm Saffery Champness, said many businesses had been paying VAT bills by direct debit.
When the scheme was introduced many switched off their direct debit instruction and deferred payments.
But Mr McGinness warned those who took the step to ensure direct debits were reinstated ahead of their next VAT return to avoid missing a payment.
He acknowledged that some businesses may still be facing difficulties in making VAT payments after 1 July 2020, or any “catch up” payment on 31 March 2021.
“These businesses should contact HMRC at the earliest opportunity and discuss a ‘time to pay arrangement’ for a further extension,” Mr McGinness advised.
Further help possible
While the VAT holiday scheme is ending, Saffery Champness said further help in the form of a reduction in VAT rates may be announced.
This could be unveiled when chancellor Rishi Sunak delivers his Fiscal Event statement in July.
This would be in line with action already taken by some European countries, including Germany.
HMRC is also upholding its commitment to allow any self-assessment income tax payments, due by the end of July, to be put off until 31 January 2021.
Martyn Dobinson, a member of Saffery’s landed estates and rural business group, urged anyone who could afford to make the July self-assessment payment to do so.
“We would advise rural businesses to make payments as normal, and by the regular due date,” Mr Dobinson said.
This would help to minimise what could be significant pressure on finances early next year resulting from deferred VAT payments and interest and repayments on loans used under government support schemes.
Those potentially significant liabilities were also likely to come off the back of a sustained period of poor or restricted trading for many businesses, he warned.