As VAT defferals end, BES encourages businesses to engage with HMRC
Published on in Blog
A key support for businesses during the “Covid-19 lockdown” was, the deferment of VAT obligations falling due between the 20th March and 30th June 2020. This was boosted, with the decision that deferrals did not have to be paid back (in full) until 31st March 2021.
The scheme has now ended, and registered businesses need to re-commence submitting returns and meeting due obligations. Those who took advantage of the scheme need to plan how they are going to repay the deferred amount. For some this will be relatively straightforward, but for many this may a daunting prospect.
Whilst economic activity (for most) businesses has re-commenced, for many the level of sales activity is lower than pre-lockdown and cash is tight. Businesses are also facing increased costs due to necessary Covid-19 measures, so margins are being squeezed, even those who have the benefit of the lower VAT rate until January next year.
Consequently, meeting current and future tax obligations may be challenging, let alone repaying deferred sums. However, ignoring the situation is not going to make it go away. The recommendation is, be pro-active and seek to engage with HMRC.
There is another dimension that requires consideration. From the 1st December HMRC will rank as a preferred creditor for certain taxes, including VAT. HMRC is keen to crack down on what it views as “tax abuse via the trading on crown funds”. Being a preferential creditor will enable HMRC to rank ahead of others in an insolvency regarding the distribution of funds.
It is, therefore, conceivable that HMRC may take a more stringent approach to VAT (and other tax) arrears, especially if the business is not engaged with them. If there is no dialogue, HMRC cannot know the intent of the business, which may create a bad impression.
So, if you have concerns about repaying deferred VAT, any other arrears or meeting future obligations, it is recommended you get in touch with HMRC sooner rather than later. Due taxes must be paid, but via dialogue, agreements can be reached that work for all.
If you want to speak to someone about your business or you want help navigating the broad array of advice and support schemes available, give Business East Sussex a call on 01273 335878 or email us at info@businesseastsussex.org.uk.