Posted: 15 May 2020 7 min. read

COVID-19 update for high growth companies - VAT considerations

Deloitte Private High Growth recently held a COVID-19 webinar for Founders and CxOs of fast growing tech-enabled UK businesses. Tax and indirect tax considerations during this time is of particular relevance to our high growth audience and so I was delighted to join as a speaker and share a few key insights, specifically in regards to VAT.

Appreciating that time is tight for many of us right now, if you were unable to listen, I’ve outlined some key considerations below (you can also access a recording of the webinar here).

Many firms manage VAT as a cash asset of their business, which depending on the underlying VAT profile, can represent either an absolute or cash flow cost.

In this respect, the Government’s deferral programme could be welcomed by many, enabling businesses to defer UK VAT payments due between 20 March 2020 and 30 June 2020 until 31 March 2021. There are, however, a few practical considerations to bear in mind:

  • the deferral includes payments on account and annual VAT accounting, but excludes mini one stop shop payments;
  • interest and penalties will not be charged on amounts deferred;
  • VAT returns must continue to be submitted to HMRC on time;
  • there is no requirement to inform HMRC that you are taking advantage of the deferral; and
  • direct debits must be cancelled with banks directly.

From 1 July 2020, VAT payments will again become due as normal (e.g. May VAT returns due for submission/payment by 7 July 2020, or balancing payments). However, HMRC is open to discuss Time To Pay arrangements with businesses to help them manage their individual tax payments.

Outside of the deferral programme, businesses can also consider other potential options to increase their cash-flow from a VAT perspective. For example, managing invoicing/payment terms with suppliers/customers, amending VAT return periods in order to bring forward VAT accounting periods (e.g. the first week of the next period when a number of purchases invoices may be received) or ensuring all VAT has been recovered, particularly in relation to staff expenses and overseas VAT, which can be overlooked.

For those involved in more VAT-sensitive activities, such as education, healthcare and financial services, VAT has always been of particular commercial importance. For fast growing tech-enabled businesses involved with these activities , the advent of technology can cast doubt over whether or not VAT should be payable on services. Businesses in this space may benefit from critically analysing potential VAT related opportunities within their supply chains. This analysis should also include consideration of VAT recovery methodologies, including appropriately factoring in supplies to non-EU customers, whether inadvertent VAT costs are created through group structures and how staff are utilised throughout the same.

Deloitte Private High Growth is running monthly webinars with professionals from across Deloitte to provide relevant insights for Founders and CxOs. You can register for our next webcast here.

Finally, Deloitte has pulled together a useful framework on resilient leadership and provides practical and specific steps that can help blunt the crisis’s impact—and enable organisations to emerge stronger, you can access the guide in full here.

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Key contact

Dave Taylor

Dave Taylor

Associate Director

Dave is an Associate Director within the Deloitte Financial Services & Insurance team. Based in Leeds, he leads the Deloitte indirect tax proposition in relation to FinTech businesses, involving the consideration of how technology is disrupting the financial services industry, particularly within the payments and banking markets. Recent projects also include advising clients on the indirect tax implications of Initial Coin Offerings, peer-to-peer lending arrangements and the electronic intermediation of lending/insurance products.