Coronavirus – VAT Considerations

Mar 25, 2020 | Coronavirus Updates

With the country in lockdown and many businesses being forced to close their doors temporarily, managing cash-flow is more critical than ever.  The Government has pledged its headline support to businesses, employers, employees and even the self-employed, but detail as to how these support schemes will work is still scant.  However, in the meantime, there are existing ways in which you can manage your VAT position to release some vital short-term cash-flow.

VAT Deferment – the Chancellor has announced that all VAT payments are to be postponed for 3 months until the end of June 2020.  This should benefit around 2 million VAT payers, and delay tax arising on pre-crisis trading.  The VAT will then be due by 31 March 2021.  It is important to remember to cancel your Direct Debits to take advantage of this relief, otherwise HMRC will continue to collect payments as normal.


Bad Debt Relief –  Business that are suffering from bad debts may also be able to claim back some VAT that has been paid to HMRC.  Generally speaking, when a business has not been paid and six months have elapsed since the due date, the business can reclaim some or all of the VAT back from HMRC.

VAT Cash Accounting Scheme – If a business is anticipating cash flow shortages caused by customers taking longer to pay, it might be worth considering the VAT cash accounting scheme.  The idea of this scheme is that you only need to pay the VAT to HMRC when your customer has paid you.

Time To Pay (TTP) – If you are anticipating struggling to pay an upcoming VAT liability a TTP arrangement allows a business suffering temporary finance difficulties to pay its tax liabilities over an extended period of time rather than on the day they fall due.   If the VAT deferment scheme is not extended beyond June 2020, this should be the first port of call for businesses.

If you have concerns over cash flow or broader working capital issues, we can help you to navigate the myriad of grants and loans which are available to businesses during this unprecedented time.  We can also help you to prepare cash flow forecasts and to look at scenario planning to understand the potential short- and medium-term implications of the current crisis. 

Further information on these VAT points and other potentially relevant issues caused by Covid-19 can be found at the following: 

Please get in touch with Matthew Orange if you have any questions.


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