As part of the package of financial support available to business, the government announced that companies could defer VAT payment to help liquidity for those in financial hardship and to help keep businesses up and running.
The first point to note is that the scheme is optional and it is up to business to decide whether or not to defer VAT payments. For companies that are facing financial difficulties it may be one of the support measures adopted to get through this difficult time. For businesses that aren’t facing hardship that decision may pivot on corporate responsibility or reputational issues – what is the right thing to do?
If a business chooses to defer VAT payments, it does not need to inform HMRC, but if there are direct debits set up to pay HMRC, then these will likely have to be temporarily suspended those otherwise the money may be taken.
The period of VAT deferral is from 20th March 2020 – 30th June 2020 confusion and put simply, if you have a payment date that fall within those two dates, you can defer that payment if you choose to do so.
Once that deferral period is over, the business will have to restart payments and will have until March 31st 2021 to pay the amount of VAT that was deferred.
There won’t be any penalties or fees for choosing to defer. However, even if the business is not paying VAT during the deferral period, it must still do its VAT accounting and is still responsible for submitting VAT returns on time.
Scheme doesn’t cover import VAT or duties and businesses are advise to look at liabilities for imports to determine what it owes and work out how much cash is needed. If there is a shortfall and help is needed, have a conversation with HMRC and do it early, they have increased ability to be flexible at the moment.
One of the fairly early measures set out by the government in the Coronavirus outbreak was the abolition for any business rates from 1st April to 31st March 2021 for most property uses under falling within retail, leisure, hospitality.
In order to be eligibility for the 100% business rates holiday the premises must be occupied and be close due to the Coronavirus outbreak.
The government has given local authorities a lot of guidance which is being updated regularly, but there are gaps in which businesses can claim relief. Walpole believes that the list should be widen widened to include factories, empty offices, un-let offices and more, as businesses are unable to use those premises at the present times.
A viable compromise option could be a three-month holiday across the board, which limits the pressure on public finances and is probably more reasonable than a blanket abolition for the year.
All rates relief are operated under discretion by local authority and while the government issues guidance, it is local authorities that are able to interpret the intention of the guidance and as such may be able to consider individual cases.
Business rates and devolved variances
While there is a great deal of information sharing around the response to Coronavirus, there is variation within each devolved nation.
Northern Ireland have put in place a three-month business rates holiday for all businesses and intend to review that at end of three-months.
Wales is similar to the UK, but backtracked to exclude the largest properties with rateable value of £500,000, which is thought to exclude the big supermarkets, but then also largest stores and hotels too which are closed which doesn’t seem fair.
Scotland's scheme is also similar to England's, however, they have included airports and air handling which England doesn't and it has reversed the inflation linked rate increase which would have been 1.5% applied to all properties.
Walpole will continue to publish guidance and updates as it become available. If you have any question or are struggling to access the financial support your business needs, we would like to hear from you, please contact Charlotte Keesing and Carly von Speyr.