During the coronavirus pandemic, HMRC announced that UK taxpayers could defer payments of VAT which are due between 20 March and 30 June 2020. On 24 September 2020, the Chancellor announced that businesses who deferred VAT due from 20 March to 30 June 2020 have the option to pay smaller payments over a longer period. Instead of paying the full amount by the end of March 2021, businesses can make smaller payments up to the end of March 2022, interest free.
Pay VAT deferred due to coronavirus (COVID-19)
HMRC has updated this guidance with details of how to opt-in to the new payment scheme under which, instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022. You cannot opt in yet. The online opt in process will be available in early 2021. You must opt in yourself; your agent cannot do this for you. However, it is not yet possible to opt-in and businesses wishing to take advantage of the new payment scheme should monitor the situation as it develops.
In the last JVCC meeting, HMRC took an action to review queries regarding how deferred VAT interacted with VAT grouping and deregistration. This piece discusses some of the most important factors which were discussed.
Deregistering a Business with Deferred VAT
HMRC has clarified that there is only one process for deregistering from VAT, regardless as to whether the business deregistering has deferred VAT payments owing to the coronavirus pandemic.
It has now also stated that it will not prevent businesses from cancelling VAT registrations just because they have deferred VAT payments. VAT which has been deferred is attached to the legal entity itself, such as a business or charity, and not the VAT registration number. This means that HMRC will not prevent a business or charity from deregistering just because it has deferred VAT during the pandemic.
As the VAT is attached to the legal entity and not the VAT registration number, if a business with deferred VAT joins a VAT group (and so no longer has its previous VAT registration number) the VAT liability remains with the business and does not transfer to the group.
Guidance
The current guidance for cancelling VAT registration can be found at https://www.gov.uk/vat-registration/cancel-registration. However, in response to the issues caused by the coronavirus pandemic, HMRC has stated that it will be updating its internal guidance so that the advice being given to businesses and charities is consistent with regard to deferred VAT and VAT deregistration.
The current guidance on VAT Group and divisional registration can be found here.
Any Questions?
If you have any questions or concerns regarding deferred VAT payments or VAT group registration/deregistration, then please contact Constable VAT – we will be able to assist.
This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.