Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.
Factsheet for measure GB-2020-12/534 – Updated – measures in United Kingdom
|Country||United Kingdom , applies nationwide|
|Time period||Temporary, 20 March 2020 – 30 June 2020|
|Type||Legislations or other statutory regulations|
Supporting businesses to stay afloat
– Deferral of payments or liabilities
|Author||Claire Evans (Warwick University) and Eurofound|
|Measure added||13 April 2020 (updated 06 October 2020)|
This measure was announced as part of Budget 2020 and is part of the raft of measures introduced to support businesses through the coronavirus crisis. The measure allows businesses to defer payment of VAT to Her Majesty's Revenue and Customs (HMRC) until next year. Generally, businesses are required to submit a VAT return and pay the VAT they owe on a quarterly basis. However, in his statement on the 20th of March, the Chancellor announced that the next quarter of VAT payments would be deferred. Details are given on the Government’s Business Support site.
The legislative background is the Coronavirus Act 2020, within section 79 (HMRC functions).
Value Added Tax (VAT) Generally, businesses are required to submit a VAT return and pay the VAT they owe on a quarterly basis. In his statement on 20 March, the Chancellor announced that the next quarter of VAT payments would be deferred. Details are given on the Government’s Business Support site.
The deferral will apply from 20 March to 30 June 2020 and will be offered automatically so that businesses will not be required to make an application. All VAT-registered businesses will be eligible. Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. HMRC have advised that customers who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. They should do in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return.
On 26 March, Her Majesty's Revenue and Customs (HMRC) issued further guidance on this scheme. This underlines that HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement. Businesses will still need to submit their VAT returns on time. VAT payments due following the end of the deferral period will have to be paid as normal, and HMRC have stated that further information about how to repay deferred VAT will be available soon.
As of the 7 April, 342,000 payments were eligible for deferral, with 140,000 payments deferred by businesses. GBP 5.1 billion of VAT was deferred during this period. In the period to 7th of May, 549,000 payments were eligible for deferral and 243,000 businesses deferred payment, to the sum of GBP 17.2 billion (cumulative amount of VAT deferred = GBP 22.3 billion). In the month to 7th of June, 337,000 payments were eligible for deferral and 113,000 payments had been deferred by businesses, to an amount of GBP 5.2 billion. This brought the cumulative total to GBP 27.5 billion of deferred VAT payments.
The scheme closed at the 30 June, with all payments due by the 30 June 2021.
|Does not apply to workers||Applies to all businesses||Does not apply to citizens|
Social partners' role in designing the measure and form of involvement:
|Trade unions||Employers' organisations|
|Form||Not applicable||Direct consultation outside a formal body|
Social partners' role in the implementation, monitoring and assessment phase:
Please note that the UK does not have formal institutional settings for involvement in the design, implementation and monitoring of policies although often, there will be information exchange and consultation, conducted on informal bases (this exists in addition to formal responses from the social partners to official consultations).
It is reported that the Chancellor held discussions with both the CBI and the TUC before launching the raft of emergency measures at the start of the epidemic. Therefore, there will have been discussion but there is no information available on these.
This was a unilateral government measure and did not ensue as a result of social dialogue. However, it can be assumed that business groups at least were consulted with on an informal basis.
Eurofound (2020), Deferral of VAT payments due to coronavirus (COVID-19) , measure GB-2020-12/534 (measures in United Kingdom), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/GB-2020-12_534.html
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Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process.