The payment of VAT and duties can be a significant cash flow burden on businesses and HMRC has recognised this in the number of easements introduced in response to the COVID-19 crisis. The Chancellor announced on 20 March that VAT payments due from 20 March to 30 June could be deferred until 31 March 2021. However, the deferral did not apply to import VAT or duties which were to be paid as normal.
Deferment is not automatic and requires rapid action
HMRC has today announced that the payment of import VAT and duties due on 15 April can, subject to a financial hardship test, be delayed. Unlike the earlier VAT deferral which was automatic (although businesses that could pay are encouraged to do so), there are conditions attached to this extension, but it will nevertheless be welcome news for many importers. However, given the short time until the payments will be taken, businesses must act now. HMRC has confirmed that their contact lines will be staffed over the bank holiday weekend to deal with requests.
We’ve been speaking to businesses today and this news has been very well received by those concerned about managing their cash-flow, and further evidence of HMRC continuing to work with taxpayers. The offer of support over the weekend is also much appreciated.Jamie Ratcliffe, Head of Indirect Tax, EY UK&I
Duty deferment account holder in COVID-19 triggered financial difficulty?
Many importers have a duty deferment account (which allows the payment of import VAT and duties to be suspended until the 15th day of the month after the import). If such a business is experiencing severe financial difficulty because of COVID-19 and is unable to pay the customs duties and import VAT due on 15 April 2020, they can contact HMRC for approval to enter an extended payment period.
How to apply for the deferral
The business should contact the Duty Deferment Office by:
– Telephone: 03000 594243
– Email: email@example.com
– Or telephone the COVID-19 helpline on 0800 024 1222.
As part of the approval process, the business will need to explain how COVID-19 has impacted their business finances and cash flow. Where HMRC agree to an extended payment period, interest will not be charged on the outstanding payments, provided they are paid in full by the agreed date.
Not a duty deferment account holder?
There are similar conditions for registered importers who do not have a deferment account and pay cash or an equivalent. Again, if businesses are facing severe financial difficulties as a direct result of COVID-19, they can contact HMRC to request an extension to the payment deadline at the time the payment is due. They will also be asked to provide an explanation of how COVID-19 has impacted on their business finances. HMRC will consider this request and will grant or refuse additional time to pay. We understand that this will be on a case-by-case basis and could be refused and the conditions will depend on the specific circumstances – and a financial guarantee may be required.
For further information, contact HMRC’s Customs Debt Policy inbox (firstname.lastname@example.org)
Don’t wait until Tuesday
We recommend that HMRC are contacted immediately to avoid the inevitable high volume of requests on Tuesday, following the public holiday.
In advance of contacting HMRC, prepare:
- It is important to have evidence to demonstrate the financial difficulty that making the payments would cause.
- It will also be necessary to agree a date for the outstanding amount to be repaid so this should be considered in advance of the call.
- Given the timing of the measure, it is not clear if there is enough time for scheduled payments to be stopped so this must be discussed and agreed with HMRC.
- Follow up any agreed actions in an email to the HMRC email addresses above.
For further information or support with your application, EY specialists are available to help – contact details here.
Visit EY’s COVID-19 hub for insights, our practical government support guides and webcasts: ey.com/uk/covid