Potential VAT Refund for Businesses that missed deferring payments

As part of the Government’s attempts to combat the economic impact of Coronavirus, UK businesses have been able to defer their VAT payments which were due between 20 March 2020 and 30 June 2020.

However, the announcement of the scheme was somewhat confused, and was subject to a number of subsequent changes. It was not, for example, immediately apparent that businesses would have to cancel their Direct Debits in order to defer payment.

It may therefore be that some businesses have thought that their payment has been deferred when it was in fact collected.

Certainly, a number of businesses appear to have still received messages from HMRC stating that their Direct Debits will be collected when they believed they had been cancelled.

These are likely to be automatically generated messages; however, it would be sensible if businesses check whether their VAT payment has indeed been deferred or collected.

If a business has paid its VAT bill when, in reality, they intended to defer the payment, all might not be lost. HMRC have confirmed that those wanting to claim a refund are able to submit a Direct Debit Indemnity Claim to their bank, ensuring that they state they want to claim a refund under the Direct Debit Indemnity Scheme (DDI). They have also confirmed there is no time limit in making the request for a refund.

If the taxpayer would prefer a repayment from HMRC rather than contacting their bank, they must ensure that their bank details are updated using the online services.

As Payable Orders are not currently being used due to COVID-19 restrictions, it may take up to 21 days to receive a refund if the Direct Debit Indemnity Claim process is not used.

It is thought that HMRC will provide further guidance on the payment of the deferred amounts at the end of the deferral period.

In addition, businesses will need to ensure that they reinstate their direct debit after the end of the deferral period. It may be that HMRC also will issue further guidance in the coming days.

Julian Borley, VAT Director at Milsted Langdon said “There may be businesses who would not have been in a position to cancel their VAT payment direct debit. It is good to hear that HMRC have confirmed that those businesses may have the opportunity to claim relief.”

If you are concerned about what these change may mean for your business, please email VAT@milstedlangdon.co.uk.

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Posted in Blog, COVID-19 Knowledge Hub.