VAT Holiday thus ends in the UK
When a delay in payment of VAT was offered by the HMRC in March, many companies rejoiced at this move as they were reeling from the Corona crisis. As this VAT Holiday came to an end on 1st July, it now becomes important for companies to focus on their dues again and bring their books back in order. To do this, companies have time till March 2021 to pay their VAT bill deferred for the period between March 20 and June 30th this year.
The priority now would be planning to pay the VAT bill next year. This is particularly integral for those companies that underwent and may still be undergoing cash flow problems arising from the crisis. With having to continue to pay salaries to their employees, run operations, and keep the company afloat despite a lack of payments from clients, it is important to delve into accounts and put a prudent plan in place to ensure cash availability for payment of VAT.
Probably the ideal way to approach this would be to brainstorm on a plan of action and look at the scenario holistically as tax planning than looking exclusively at VAT. This involves having a keen eye on the various waivers and exemptions possible to reduce the corporate tax and requesting Revenue to defer dates on payment of other taxes to stretch the available cash to the maximum.
According to The Institute for Fiscal Studies (IFS), roughly five percent of the VAT pushed back will not be returned to HMRC due to companies going bankrupt or facing acute financial strain. Although companies are likely to have lower VAT liabilities due to a lack in sales or revenue, they will have to still make room for turnover collected from Jan to March 2020.
The real problem would be noticed in March 2021, the last date for VAT payments for the period March to June 2020. If banks do not increase their lending limits or there is no other help available, then some companies on the edge of bankruptcy will close down due to lack of this assistance.
According to HMRC, it is estimated that around 6,40,000 companies that pay taxes quarterly will have to pay up on the last date July 7th. HMRC thinks that due to the hiatus in financial transactions, the number of companies that are required to pay VAT may be much lesser than the number of companies that submit their returns.
The tax payment deadline of July 7th will be the initial major hurdle for companies as they have to dig up the cash to pay for VAT on the items billed till June but cannot be certain of receiving the payments from their clients. It would have been beneficial for companies, especially in the small and average bracket, to have the April to June VAT payments also pushed back to be paid in March 2021 as they would be hard-pressed to raise cash to pay this in July now.
If you are looking for prudent and accurate regulatory reporting planning and ensuring that your company complies with the procedures introduced by HMRC and Revenue, you’ve hit a gold mine! We at DataTracks, have helped over 18,000 companies tide over the current crisis with ease and continue to support them with their tax filing for over a decade. Let’s start discussing now! Contact us at firstname.lastname@example.org