Over 25% of VAT registered businesses that were permitted to delay VAT payments as a result of the pandemic still owe HMRC the tax deferred.
The now closed payment scheme permitted VAT registered persons to defer VAT payments due between March and June 2020 and around 600,000 businesses took advantage of the relief. The deadline was 30 June 2021, and it has been stated that over a quarter of business have failed to contact HMRC about their debts and have not made the necessary payments.
The total outstanding, according to The Treasury, is £2.7 billion which represents circa 9% of the VAT take. Of the tax deferred under the scheme, £17.8 billion has been paid and around £13 billion is being paid via monthly instalments.
HMRC have announced its approach to collection VAT debt after Covid19.
It has also become clear is that businesses and consumers have fallen into default during and after the pandemic. It is anticipated that the ability to settle of debts on time will decrease and it is apparent that many debts will never be settled. Consequently, it appears timely to look at the available relief. An article on VAT Bad Debt Relief here.
We would urge, that even if a business cannot make a payment, that it still submits VAT returns on time. It is tempting to accept a centrally issued assessment if it is for a lesser amount than the actual VAT due for the period. However, such action can, and often does, lead to penalties and increased interest from HMRC.