Deferring VAT and tax payments
As part of the government’s response to assist businesses during the COVID-19 crisis is the offer to defer VAT and self-assessment tax and NIC payments.
HMRC will not enforce payment of VAT liabilities that fall due between 20 March 2020 and 30 June 2020. For most VAT registered firms, this will boost cashflow as one quarter's VAT payment will not be made.
SELF-ASSESSMENT TAX AND NIC
HMRC have also confirmed that any second payment on account due 31 July 2020 does not need to be made.
Whilst businesses and tax payers will appreciate this offer, there will come a day of reckoning.
Deferred does not mean cancelled.
Any deferred VAT will need to be paid by 31 March 2021, and any deferred self-assessment tax by 31 January 2021.
Make sure you factor these 2021 payments into your cashflow forecasting. Business owners may forget that these potentially significant payments will need to be dealt with early next year.
As the COVID-19 lock-down starts to bite, businesses will be utilising available resources to meet their daily needs. In a number of cases this may see cashflow diminish as losses start to make inroads into reserves.
The best way to plan for these deferred payments is to create a cashflow forecast. This can be a simple spreadsheet with a list of monies due in, monies to be paid out, and that projects a running balance of your bank balances. This needs to be done at least a year ahead and reviewed monthly so you can see where cash shortages are likely to occur.
We can set this up for you and show you how to keep the report up-to-date.