Indirect taxes

COVID-19 measures for indirect tax

VAT liability
VAT returns and payment
International sales and purchases
Other indirect taxes


Latest updates:
02/06/2020
NEW: What do I do if I want to defer my VAT but it has been paid in error?
29/05/2020
NEW: Are there any easements on time limits for exports and removals?
UPDATED: Are there any additional measures for exporters?
UPDATED: Do I have to consider VAT if I donate PPE?
 
21/05/2020
UPDATED: Will any interest or penalties apply to a delayed VAT return?

The guidance pages on gov.uk that are impacted by COVID-19 easements are being updated by HMRC daily, so please note that the information below may not contain all current updates. Also, some COVID-19 updates are being embedded into individual pages of existing guidance so may not necessarily appear on the main COVID-19 webpage for businesses, so we recommend that you also check relevant gov.uk guidance pages if you cannot see your query below. Where the CIOT is awaiting guidance to be published, this means we will have been notified by HMRC directly and we anticipate that the relevant update should appear on GOV.UK within days.

Query

Status / response

VAT liability
Do I have to charge VAT on supplies of personal protective equipment (PPE)?
In Revenue and Customs Brief 4/20, HMRC have introduced a temporary zero-rate to PPE  for supplies made in the period from 1 May to 31 July 2020. For a full list of affected products, see GOV.UK (also see imports below). There is not a ‘use’ test for the temporary zero rating.
Do I have to consider VAT if I donate PPE?
The usual business gifts rules for VAT apply, although the government will give an equivalent donation of the VAT collected on donated PPE products to healthcare charities where taxpayers notify them before the end of June. Contact ppe [at] hmrc.gov.uk for further information.
GOV.UK (section 2)
Do I have to account for VAT if I receive a government COVID-19 grant for my business?
The COVID-19 grants announced by BEIS (including the Small Business Grant, and the Retail, Hospitality and Leisure Grant as well a grant via the Self-Employment Income Support Scheme) are outside the scope of VAT so no output VAT is due on this income. The grant income should be disregarded for the purposes of the VAT registration and deregistration thresholds.
The receipt of grant funding does not automatically mean that an activity is not business or lead to apportionment of input tax. You should look at each grant-funded activity separately and consider whether the activity is business or not. Where grants are received to support business activities, the normal input VAT rules apply. 
Do I have to charge VAT on supplies of e-publications?
In Revenue and Customs Brief 3/20, due to the need for people to stay at home the date of implementing the zero-rate for certain e-publications has been brought forward to 1 May 2020.
GOV.UK
VAT returns and payment
Do VAT returns need to be filed during the period 20 March 2020 until 30 June 2020?
Yes, VAT returns should continue to be submitted on time. It is the payment for eligible VAT returns that can be deferred (see below).
If a business is unable to submit accurate figures on the VAT return they should contact HMRC to obtain permission to use estimated figures. Details of why accurate figures are not available will need to be supplied to HMRC.
Do VAT return payments need to be made during the period 20 March 2020 until 30 June 2020?
All payments of VAT arising from VAT returns that are due to be paid to HMRC between 20 March 2020 and 30 June 2020 can be deferred until 31 March 2021. This includes:
  • Payment for monthly and quarterly returns ending 29 February due 7 April,
  • Payment for monthly and quarterly returns ending 31 March due 7 May,
  • Payment for monthly and quarterly returns ending 30 April due 7 June,
  • Payments on account where the payment is due in this period. This includes interim payments and balancing payments if their due date is up to and including 30 June 2020. 
  • Annual Accounting advance payments where the payment is due in this period. Annual accounting balancing payments are included, and they will be reduced by the amount of any payments deferred.
If you do not want to defer your VAT payment, you can pay it on time as usual.
GOV.UK
Which VAT return payments cannot be deferred?
VAT return payments with a due date outside of the deferral period date range must be paid on time as normal, including:
  • Payment for monthly and quarterly returns ending 31 May must be paid by 7 July
  • Payment for monthly and quarterly returns ending 30 June must be paid by 7 August
  • Payments on account where the interim payment or balancing payment is due from 1 July 2020 onwards
How do I pay my deferred VAT?
Payment of the deferred VAT must be made on or before 31 March 2021. Businesses may:
  • make ad hoc payments after the deferral period ends (after 30 June 2020) to repay any deferred VAT up to 31 March 2021, or
  • make a one-off payment of the whole sum by the deadline.
Deferred VAT will not be automatically collected by HMRC via the direct debit that collects payment for VAT returns; taxpayers must make their own arrangements for the payment(s) to be made. 
What do I do if I want to defer my VAT but it has been paid in error?
A refund can be claimed if a direct debit was not cancelled in time.
The quickest way for taxpayers to claim a refund is to submit a Direct Debit Indemnity Claim (DDIC) to their bank. When doing so they must ensure they state they want to claim a refund under the Direct Debit Indemnity Scheme. There is no time limit in making this request.
If a taxpayer wants a repayment from HMRC rather than contacting the bank, they must ensure that their bank details are updated using the online services. Due to COVID-19 restrictions, payable orders are not being issued. It may take 21 days for the refund to be received if the DDIC process is not used.
Will any interest or penalties apply to the delayed payment?
No. However, VAT returns must still be submitted on time. GOV.UK
Will any interest or penalties apply to a delayed VAT return?
If the VAT return is submitted late, a central assessment may still be issued by HMRC. Updated guidance has been published about the impact of COVID-19 measures on reasonable excuse, appeals and penalties. For COVID-19 issues, HMRC will give you an extra 3 months to appeal any penalty dated February 2020 or later (see Tax Administration).
If my balancing payment is due after the easement period ends, how much do I have to pay to HMRC if my interim payments on account have been deferred?
If you defer a payment on account between 20 March 2020 and 30 June 2020 but the balancing payment is outside of these dates, the amount you must pay is the balancing payment less any deferred payments. Deferring payments will not create a repayment.
GOV.UK
My business needs more help than this, what other help is available?
HMRC’s Time to Pay system has been enhanced to fit the specific impacts of COVID-19 and is available to all businesses and individuals who are in temporary financial distress as a result of the coronavirus measures and who are unable to pay their tax on time or have existing liabilities. Additionally, HMRC has a dedicated helpline for those who cannot pay because of COVID-19: 0800 024 1222.
If a business normally pays its VAT return by direct debit, do they need to cancel the direct debit or will HMRC simply not collect payment?
Businesses who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay, and in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return. Direct debits should be reinstated for payments after the deferral period.

GOV.UK

Does deferral apply to VAT due to be paid in relation to disclosures and assessments due to HMRC?
No, only VAT payments due alongside normal VAT returns between 20 March and end of June will be deferred.
How will repayments work, will you offset repayments against VAT due? Can you make repayments faster?
Repayments will be paid as normal. This means that HMRC will offset repayments against any existing debt before this announcement but not against any VAT deferred through this announcement. Most repayments are paid within five working days.
If I am now in or going to be in a repayment position, can I move to monthly returns to improve future cash-flow?
Businesses, or their agents, can apply online to request to change to monthly VAT returns. Visit GOV.uk and search for “change VAT details".
I have made Time To Pay (TTP) arrangements with HMRC before the 20 March, can I defer payment until 31 March 2021?
For TTP arrangements made for payments due before 20 March 2020, you will need to continue to make these payments. If you are struggling to meet these obligations, then you can contact the dedicated helpline on 0800 024 1222.
For TTP arrangements made for payments due between 20 March 2020 and 30 June 2020 only, you can benefit from the ability to defer payment until 31 March 2021. You do not need to notify HMRC. You will need to cancel any Direct Debits set up for these arrangements.
Does the VAT payment deferral also apply to non-established businesses registered for UK VAT?
Yes it does.
GOV.UK
Do MTD digital links have to be in place by 1 April 2020, or 1 October 2020 if you are in the deferred group?
HMRC has announced that it is providing all MTD businesses with more time to put digital links in place between all parts of their functional compatible software. The deadline is now the first VAT return period starting on or after 1 April 2021. 
GOV.UK
Does the VAT deferral period impact bad debt relief?
If you have deferred your VAT return payment due to the COVID-19 easement, you cannot claim bad debt relief for unpaid invoices where the corresponding output VAT is still unpaid to HMRC. It can be claimed once the deferred VAT has been repaid to HMRC.
Are there COVID-19 measures for specific sectors?
HMRC have published COVID-19 advice in VAT notice 700/44 for barristers and advocates.
Are there any COVID-19 measures for an option to tax?
There is a temporary extension of the notification period for an option to tax and a temporarily easement allowing electronic signatures to be used on form 1614A where supporting evidence is supplied. This is published on GOV.UK.
International sales and purchases
Does the VAT payment deferral also apply to VAT MOSS?
No. Payments for Union and Non-union MOSS returns are not included in the COVID-19 VAT deferral and should be paid as usual.

GOV.UK

Does the VAT payment deferral also apply to import VAT?
Import VAT and customs duty will continue to be collected in the usual manner. Where duty deferment account holders are experiencing severe financial difficulty as a result of COVID-19 and who are unable to make payment of deferred customs duties and import VAT can contact HMRC for approval to enter into an extended period to make full or partial payment, without having their guarantee called upon or their deferment account suspended – see here for further details. 
Are there any easements for import VAT?
There is an easement for specific goods allowing tax free imports of certain medical supplies, hygiene equipment and protective garments during the COVID-19 response. The qualifying criteria and product list are published on GOV.UK.
The European Commission has published a press release on its 6 month tax-free easement for importers of protective equipment and medical products used for COVID-19 response to 31 July 2020, as and the decision has retrospective effect to 30 January. We await further guidance from HMRC as to whether the retrospective treatment will be granted for UK imports.   
EC.europa.EU
Are there any easements on time limits for exports and removals?
HMRC has updated it guidance with criteria where HMRC may grant a discretionary waiver on the time limits for export and for the removal of goods to EU member states due to COVID-19 issues.
GOV.UK
Are there any easements when importing goods from, or exporting goods to, outside of the EU?
Measures include: exports less than €3000, delays during transit of goods and estimated supplementary declarations (though this excludes SDs with excise).
GOV.UK
Are there any additional measures for exporters?
A temporary export licence wass required when exporting personal protective equipment (PPE) to countries outside of the EU, EFTA and certain dependant/other territories but this requirement expired for all exports from midnight on 25 May onwards.
GOV.UK
Are there any easements on customs authorisations?
Measures include: what to do if you are not able to comply with a condition of the customs authorisation, use of email with HMRC instead of post, HMRC customs visits, and automatic renewals of authorisations.
GOV.UK
Are there easements on tariff preferences?
You can claim preferential tariff rates using a copy of the original preference certificate held by the declarant for imports (GOV.UK) and Turkey (GOV.UK).
Other indirect taxes
Does the deferral apply to other indirect taxes/duties such as Machine Games Duty, Insurance Premium Tax, etc.
No, unless covered by another Government announcement, you must pay all other taxes/duties in line with existing rules.
Can I still pay Wine or Cider Duty by post?
No. Temporary measures have been put in place to stop the spread of the coronavirus and you must now pay wine or cider duty electronically by Faster Payment, BACS or CHAPS and not by post. GOV.UK
Can I still pay Climate Change Levy by post?
No. Temporary measures have been put in place to stop the spread of the coronavirus and you must now pay Climate Change Levy electronically by Faster Payment, Bacs or CHAPS and not by post. GOV.UK