While deferred VAT payments has been used by Governments in Europe to ease the financial burden of struggling businesses in their own countries, an inconsistent approach to COVID-19 VAT reliefs is creating a confusing picture, argues Director of Professional Services Andy Spencer.
VAT is probably one of the last things that many people will be thinking of in the current crisis. It is a tax on transactions and for a large percentage of the population around the EU, purchasing is increasingly restricted to essential items such as food and medicine.
However, VAT is being used by many governments around Europe as a means of introducing liquidity into the economy and relief for businesses affected by the crisis.
The UK government has used VAT to introduce a financial stimulus of a stated £30bn to the UK economy. It is clear that the deferral of all VAT payments that are due in the period from 20 March 2020 to 30 June 2020 has been seen as a rapid means of introducing liquidity to businesses rather than waiting for grants to be made or for the banks to approve loans.
It was in this context that the original official announcement stated the relief was for UK businesses. This made sense if the intention was to support UK businesses suffering as a result of the crisis.
This led to confusion as to whether non-established businesses that were registered for VAT in the UK could benefit from the deferral. The position was clarified on 26 March 2020 with a further announcement that all businesses registered for VAT in the UK could benefit from the deferral, which is automatic but not compulsory and not subject to an application process.
Repayment has to be made by 31 March 2021 and no interest or penalties will be applied. Interestingly, the deferral does not apply to payments that have to be made under the Mini One Stop Shop scheme, which is used to account for VAT on business-to-consumer supplies of telecoms, broadcasting and electronic supplied services to customers in other EU member states…