COVID-19: Deferral of VAT update: The government has just announced that businesses now have until 31 March 2021 to pay any VAT deferred as a result of this announcement. In addition, businesses can opt in to the deferral simply by not making VAT payments due in this period.
The announcement also advised that businesses who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. This can be done online if they’re registered for online banking.
Business taking advantage of this deferral need to cancel their direct debit in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.
However, those who wish to continue paying as normal through the deferral period should do so if the wish.
The good news is that HMRC will continue to process repayment claims as normal but HMRC are still expecting businesses to continue to submit their VAT returns as normal.
This post on COVID-19: Deferral of VAT update was sponsored by Canalitix.com
Today, the COVID-19 Job Retention Scheme Update was announced by the government to provide further clarity on how the scheme will operate.
According to the announcement, the scheme will be backdated to 1 March 2020 and provided staff remain employed throughout the crisis the funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.
The announcement further explained that the grants will cover 80% of furloughed employees’ (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
The cashflow dilemma for employers
The major stumbling block for employers is cashflow to fund the March 2020 payroll because the government is expected to cover 80% of both March and April payrolls at the end of April 2020.
One option is to take out a business interruption loan or overdraft which is being guaranteed by the government and interest free for 12 months. Unfortunately, some banks are requesting personal guarantees which may deter some directors from considering this option.
Employers may also utilise the COVID-19 Time to Pay Scheme and the VAT Deferral scheme to free up cash resources to pay employees while waiting on the government Job Retention Scheme funds.
However, it is almost predictable that the majority of the business interruption loans and overdrafts secured under the government’s 80% guarantee will go bad and get hived off to the British Business Bank as COVID-19 bad loans.
The government’s 80% guarantee doesn’t equate to free money to employers and directors giving personal guarantees. These loans and overdrafts will have to be paid back by employers for as long as it takes or they will go to the wall.
Therefore, the dilemma is whether employers protect their own future or act in the national interest and provide for their staff during the COVID-19 crisis.
The COVID-19: Job Retention Scheme Update was sponsored by Canalitix.com
The government has announced that they will support businesses during COVID-19 by deferring VAT and Income Tax payments.
VAT will be deferred for 3 months starting from 20 March 2020 until 30 June 2020 and the self-employed will have their Self Assessment advance payment due in July 2020 deferred to January 2021.
All UK businesses and self-employed individuals are eligible to take advantage of the tax deferrals which are automatic and do not require applications.
During the deferral period HMRC will not charge any penalties or interest for late payment.
Businesses and Individuals in Temporary Financial Distress
All businesses and individuals in temporary financial distress as a result of COVID-19 can also participate in HMRC Time to Pay offer, see our VAT PAYE and Corporation Tax Help for Covid-19
This post on COVID-19: Deferring VAT and Income Tax payments was sponsored by Canalitix.com
