Although deferred VAT payments have been used by governments in Europe to alleviate the financial burden of companies in their own countries in trouble, the inconsistent approach to COVID-19 VAT relief creates a misleading picture, says Professional Services Director Andy Spencer .
VAT is probably one of the last things many people will think about in the current crisis. This is a transaction tax and for a large percentage of the population across the EU, purchases are increasingly limited to basic items such as food and medicine.
JHowever, many governments in Europe use VAT as a means of introducing liquidity to the economy and relief for companies affected by the crisis.
The UK government used VAT to introduce a £ 30 billion financial incentive for the British economy. It is clear that the deferral of all VAT payments due from 20 March 2020 to 30 June 2020 was seen as a quick way to introduce liquidity for businesses instead of waiting for grants to be granted or for banks to approve the loan.
It was in this context that the original official announcement was a relief for British companies. It would make sense if the intention was to support British companies suffering from the crisis.
This led to confusion as to whether non-resident businesses registered in the United Kingdom as a VAT payer could benefit from the deferral. This position was clarified on March 26, 2020. With the further announcement that all companies registered in the UK for VAT can benefit from a deferment, which is automatic, but not mandatory and not subject to the application process.
Repayments must be made by March 31, 2021, and no interest or penalties will be charged. Interestingly, the deferral does not apply to payments that must be made under the Mini One Stop Shop program, which is used to bill VAT on the supply of telecommunications services, broadcasting services and electronic services to customers in other Member States.
Although deferred VAT payments have been used by governments in Europe to alleviate the financial burden of companies in their own countries in trouble, the inconsistent approach to COVID-19 VAT relief creates a misleading picture, says Professional Services Director Andy Spencer .
VAT is probably one of the last things many people will think about in the current crisis. This is a transaction tax and for a large percentage of the population across the EU, purchases are increasingly limited to basic items such as food and medicine.
JHowever, many governments in Europe use VAT as a means of introducing liquidity to the economy and relief for companies affected by the crisis.
The UK government used VAT to introduce a £ 30 billion financial incentive for the British economy. It is clear that the deferral of all VAT payments due from 20 March 2020 to 30 June 2020 was seen as a quick way to introduce liquidity for businesses instead of waiting for grants to be granted or for banks to approve the loan.
It was in this context that the original official announcement was a relief for British companies. It would make sense if the intention was to support British companies suffering from the crisis.
This led to confusion as to whether non-resident businesses registered in the United Kingdom as a VAT payer could benefit from the deferral. This position was clarified on March 26, 2020. With the further announcement that all companies registered in the UK for VAT can benefit from a deferment, which is automatic, but not mandatory and not subject to the application process.
Repayments must be made by March 31, 2021, and no interest or penalties will be charged. Interestingly, the deferral does not apply to payments that must be made under the Mini One Stop Shop program, which is used to bill VAT on the supply of telecommunications services, broadcasting services and electronic services to customers in other Member States.
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Justyna Urbaniak
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