Businesses who defer VAT payments should continue to file returns as usual, says HMRC

Businesses who have deferred VAT payments until the end of June 2020 should continue to file Making Tax Digital (MTD) returns as normal, the regulator has confirmed.

The guidance comes after the Government announced that all businesses severely affected by Covid-19 could defer VAT payments for up to three months to ease cash flow worries.

Commenting on the scheme, HM Revenue & Customs (HMRC) said businesses who pay via direct debit should cancel so that payment cannot be collected, but VAT-registered businesses should continue to file VAT returns as usual.

The updated VAT Notice 700/22: Making Tax Digital for VAT sets out the steps required to defer VAT payments for up to three months while still maintaining compliance with MTD regulations.

The notice comes after the regulator officially delayed the requirement to implement MTD “digital links” until 01 April 2021. Businesses and charitable organisations were initially required to implement “digital links” by 01 April 2020. A digital link is defined as the automated, electronic transfer of data between software programs, products or applications. This specifically excludes the “cutting and pasting” of data into digital accounting software.

Commenting on the move, a spokesperson said: “We understand that the impact of Covid-19 is creating extremely difficult times for all, and we are committed to helping in every way possible all those businesses facing unprecedented challenges.

“Therefore, we are providing all MTD businesses with more time to put in place digital links between all parts of their functional compatible software. This means that all businesses now have until their first VAT return period starting on or after 01 April 2021 to put digital links in place.”

For help and advice, please get in touch with our expert team today.