However, it is expected that there will be a reduction in VAT rates for some sectors, or generally, when the Chancellor Rishi Sunak gives his ‘Fiscal Event’ statement in July. This would follow action taken by some European countries, including Germany.
Also, deferment allows for self-assessment income tax payments that were due by the end of July, the second payment on account, to be put off until 31 January 2021.
“HMRC has warned that the deferred VAT scheme ends on 30 June. Those who pay by direct debit and have cancelled such payments at their bank should remember to reinstate them for the next VAT return.
“Where businesses foresee that they will be in difficulty making VAT payments after 1 July 2020, or the ‘catch up’ payment on 31 March 2021, they should contact HMRC at the earliest opportunity and discuss a ‘time to pay arrangement’ for further extension.”
“Regarding the deferral of July self-assessment tax payments until the end of January next year, we would advise to make payments as normal, and by the regular due date, where this can be afforded, and where funds have not already been earmarked for investment elsewhere in the business. This will help to reduce what will be significant pressure on finances early next year, with deferred VAT payments due by 31 March 2021 and interest and repayments starting to kick in on loans taken out through the government support schemes. Those potentially significant liabilities are also likely to come off the back of a sustained period of poor or restricted trading for many businesses.
“Getting an early handle on 2019/20 tax liabilities will also allow advance planning for payments falling due in January and July next year.”