Businesses that deferred paying their VAT bills should be allowed to spread their re-payments into the middle of next year, say tax and advisory firm Blick Rothenberg
Andrew Sanford, a business advisory partner at the firm, said: “HMRC are now writing to those businesses that deferred their VAT payments reminding them that they have to be made by March 31st. The big problem is that many businesses with the current restrictions in place will simply not be able to trade their way out of their current financial predicament.
“For many businesses, this liability is significant as it arose from trading in the period before we went into lockdown. This means that in the first quarter of next year, businesses will be required to make two VAT payments rather than one. With increased COVID-19 infection rates, and the real threat of more localised and national lockdowns many businesses will be fearful that they will have insufficient funds to settle these liabilities.
“In the first quarter of next year, business owners will have to pay two self-assessment tax payments as well covering the July 2020 and January 2021 tax payments. There needs to be more certainty provided to business owners in relation to tax payments. Businesses who can demonstrate a tangible loss as a result of COVID-19, should be allowed automatically to spread the deferred VAT payment for six months over the Summer of 2021 when they are more likely to be trading sustainably.
“If this is not addressed, we could see a spate of insolvencies and redundancies, which will ultimately reduce the tax take, and mean that many other firms are affected by bad debts from insolvent customers, causing in turn even more issues.”