Covid-19: Efficient and timely use of VAT deferral and other VAT reliefs
27th March 2020, 4:00 pm
Assessment of immediate actions required in order to minimise business interruption and maximise working capital:
- Claiming bad debt relief on any unpaid debtors, as soon as the debt is six months after its due date
- Reclaiming VAT on costs as soon as the invoice is received, not just when it is approved for payment
- If the business’ VATable turnover is less than £1.35m per year, move to cash accounting and benefit from a delay in paying VAT
- If a business is routinely entitled to VAT refunds, it will be entitled to complete VAT returns on a monthly basis
- A seasonal business may benefit from a quarterly cycle of returns that delays the payment of VAT at the busiest time of year
- Has your business been forced to close for an indefinite period? Even if you have no income, you will still be entitled to recover VAT on any costs incurred by your business. So, don’t forget to keep filing your VAT returns.
For further clarity or help on the above, please do not hesitate to contact Partner, Jonathan Main.
The Chancellor, Rishi Sunak, outlined enhancements to earlier announcements on public services and business support, to provide an economic response, which “will be one of the most
comprehensive in the world”. New measures and updates include:
Summary of updates to existing funding initiatives and new measures announced on 20
March 2020
New Coronavirus Job Retention Scheme:
• Covers any business, charity or non-profit organisation
• Covers up to 80% of the salary (up to £2,500/mth) of anyone not working (but retaining job)
as a result of Covid-19
• Wages back dated to 1 March 2020
• Initial period of 3 months, but extended if necessary
• No limit on funding
• Will be in the form of a grant (not a loan)
• Expect first to be paid within weeks, certainly by the end of April
Updates to CBIL:
• Max turnover refined from £41-45m
• Interest free period extended from 6 to 12 months
• Loans will now be available starting on Monday 23 March 2020
• Further details to be announced next week (w/c 23 March 2020) to ensure that larger and
medium sized companies can also access the credit they need
Deferral of Tax and VAT Payments:
• All UK VAT registered businesses can defer VAT payments due between 20 March 2020 and
30 June 2020 until the end of the tax year
• The Government has deferred the Income Tax Self Assessment payments for the self
employed due on 31 July 2020 to 31 January 2021.
Extra support for the welfare system (further details to be provided on request):
• Increasing today the Universal Credit standard allowance, for the next 12 months, by
£1,000/yr
• Increasing the Working Tax Credit basic element, for the next 12 months, by £1,000/yr
• Suspending the minimum income floor for all self-employed affected by the economic
impacts of coronavirus
Further details on the announcements of funding for medium and large businesses expected early next week.
British Business Bank – Coronavirus Business Interruption Loan Scheme (CBILS)
Scheme to be available week commencing 23rd March 2020. Maximum value of a facility to be £5m. There are over 40+ accredited lenders and partners. The scheme provides the lender with a government backed guarantee against the outstanding facility balance. The borrower always remains 100% liable for the debt.
On top of this, first 6-months of interest payments covered by the government.
Eligibility Criteria:
- Turnover no more than £41m per annum
- Operate within eligible industrial sector (so no banks, insurance, building societies, please click below to open PDF table of full list)
- No previous state aid beyond 200,000 Euros.
- Have a sound borrowing proposal (further information to be released)
The CBILS supports a wide range of business finance products:
- Term Facilities
- Overdrafts
- Invoice Finance Facilities
- Asset Finance Facilities
Please click here to view Ineligible and Restricted sectors table.
Budget 2020
On 17 March 2020 Chancellor Rishi Sunak announced £330bn worth of support designed to help businesses survive the coronavirus crisis. Importantly, he also promised that if all of this was not enough, he would do whatever it takes for the economy to survive against the coronavirus impact.
New measures announced since the Budget include:
- Government-backed guaranteed loans at “attractive rates”, with a £330bn pot available to firms which need money to pay rent, suppliers, staff or purchase stock.
- A new lending facility launched with the Bank of England will support larger companies.
- SMEs able to borrow up to £5m with no interest due in first six months, this has increased from the £1.2m announced in the Budget.
- Retail, leisure and hospitality companies will be exempt from business rates for a whole year, and firms in this sector with a rateable value between £15,000 and £51,000 will be given a cash grant of up to £25,000.
- Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief.
He also said that ministers were in talks to create support packages for airlines and airports.
Help with tax liabilities: Time to pay extended
The time to pay initiative is an agreement negotiated between SMEs and the Treasury which allows firms to have debt collection suspended when they can’t afford to pay their tax bill.
It was also announced on 17 March 2020 by Chancellor Rishi Sunak that HMRC will waive the 3.5% annual interest on deferred tax payments. This should alleviate some cash flow issues for businesses in the short term at least.
Time to pay arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. These businesses can contact HMRC’s new dedicated Coronavirus helpline from 11 March 2020 for advice and support, see below.
HMRC tax helpline
To ensure ongoing support, HMRC has made a further 2,000 experienced call handlers available to support firms and individuals when needed. For Time to Pay support if you are concerned about being able to pay your tax due to Coronavirus, call HMRC’s dedicated helpline on 0800 0159 559.
Supporting our clients
MHA Moore and Smalley can provide the support and guidance to help review your business, provide advice on accessing support and assist with identifying options for cash flow needs.
A key review is to revisit current forecasts/projections for the year ahead and consider the impact the current business environment may have on these forecasts and more importantly cash flow, the lifeline of any business. We can provide support in preparing forecasts/projections to assist with decision making and applying for financial support where needed.
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COVID-19 outbreak – legal and commercial risks for your global business to consider – webinar from Squire Patton Boggs