HMRC has published guidance on VAT deferral for large businesses

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Large businesses which pay VAT monthly on account of their quarterly VAT payments have a complication which HMRC has spotted and has announced guidance.

The monthly VAT payments by larger companies are based on estimated expected VAT payments. At the end of each quarter, these companies then file a quarterly VAT return and pay any balance or are refunded if they have overpaid on account. The guidance applies to companies which defer paying payments on account between 20 March and 30 June as permitted by the COVID support measures, but then have their quarterly reckon-up following 30 June (say 7 July). 

If they had issued no guidance, by not paying payments on account in April, May and June, the entire VAT bill for the quarter would be payable on 7 July, which falls outside of the deferral period. These companies would then have had to pay their VAT and would not benefit from the support measures as intended (deferring VAT till 31 March 2021).

HMRC have clarified that the final reckon-up for the quarter which takes place on, say, 7th July is calculated by taking the amount of the VAT liability in the VAT return, and deducting the amounts which would have been paid during the quarter, on account, as if they had been paid. If there is any VAT left to pay, it must be paid, and if there is a refund, it will be refunded. The payments on account are thus deferred till March 2021 as originally intended.

This guidance is a clarification of the existing support measure, and is not a new one.

If you have any concerns about this please do get in touch with us and we can assist you. 

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Ruth Corkin

Ruth has been involved with VAT for over 30 years. She started her VAT career as a Customs and Excise Officer in Essex and then moved into consultancy with a variety of well-known accountancy firms. She is well known in the VAT world and is the proud author of many articles and technical works.

Contact Ruth at ruth.corkin@hhllp.co.uk or on 01908 713 860