The VAT payment holiday window ends on 30 June, and normal service resumes from 1 July. What should you do if your clients can’t pay the VAT due by 7 July, for their May VAT return because of the impact of Covid-19 on their trading situation? The good news is that a sympathetic ear and time to pay agreement may be available from HMRC.
Payment Support Service (PSS)
The priority is to contact the PSS at HMRC before the VAT is legally due for payment. Any time to pay agreement won’t then be subject to a default surcharge. Before you call the PSS, make sure you have the client’s VAT number and bank account details to hand. Also be clear about the amount of VAT that is outstanding and your proposals to settle the arrears.
The HMRC officer you speak to will also require details about why you cannot pay on time. A partial payment on time will score brownie points, rather than asking for all of the liability to be deferred.
Contact details for the PSS: 0300-200-3835, open 8am to 4pm Monday to Friday.
It is tempting for clients to ask advisers: “What is the maximum time HMRC will let me have to pay?” This is the wrong approach; the client needs to establish how much he can afford to pay and when, then justify that time period to HMRC. There is no fixed “going rate” period that HMRC allows.
The concept of reasonable excuse has always been a key part of the VAT system. It has been the subject of many tribunal hearings over the years because it is not clearly defined in law. In the VAT world, it is relevant when a business has missed a deadline, eg filing a return, registering for VAT on time, paying tax or replying to an information notice.
The HMRC guidance on reasonable excuse now includes a paragraph that is specific to the impact of the virus: “HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations (such as payments or filing dates). Explain how you were affected by coronavirus in your appeal. You must still make the return or payment as soon as you can”.
Extra three months to appeal
More good news is that taxpayers notified of any HMRC decision that is dated February 2020 or later will be given an extra three months to appeal the decision if they think it is wrong.