As the Covid-19 VAT holiday window ends, what can businesses do to make sure they keep on top of VAT payments?
For many businesses, the VAT holiday window announced by the Government in March gave them some temporary welcome tax relief, particularly those facing cashflow issues resulting from the Coronavirus pandemic.
The flexibility means that firms now have until March 31, 2021 to pay any VAT which was owed between March 20 and June 30 this year.
But as the break from VAT payments ended on July 1st 2020, businesses will now have to start paying VAT on the normal due date but still allow for those suspended payments over the past three months which they still owe.
Many businesses already struggling will have their problems compounded when HMRC come knocking on the door.
So what can businesses do to prepare?
At present, some firms will receive a lower VAT bill due to reduced sales, but sales for the first three months of the year might not have been impacted, meaning that the deferred bill due in March 2021 is likely to be a lot bigger and could tip businesses over the edge if they haven’t planned for it.
Good cashflow planning is key. The issue is a lot wider than just VAT and Corporate Finance has a key role to play.
Businesses need to look closely at their other corporate taxes and time to pay arrangements for the year and work around them.
They can also perhaps take advantage of other tax reliefs and claims to ease their cashflow and ensure they have sufficient funds to pay their VAT when the time arrives. For example, now may be a good time to renegotiate payments on account as they may no longer reflect the true VAT liability.
For those businesses in serious financial difficulty, other options they could consider include contacting HMRC to ask for ‘extra time’ on VAT Payment holidays or citing Coronavirus as a reasonable excuse for non-payment.
Take Action Now
Please contact our VAT or Corporate Finance specialists to discuss the VAT or cashflow challenges you are facing and the solutions available to you by calling 0845 555 8844. Don’t wait, take advice now, we are here to help you.
Director of Indirect Tax for SMEs and Not for Profits