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Tax changes from COVID-19 measures

The steps taken in reaction to the COVID-19 outbreak, including the closure of pubs and restaurants, will have major implications for many businesses. As a result, the government has announced an unprecedented series of measures on Friday designed to support businesses who will suffer.

This has included measures to help businesses with payment of their tax liabilities:

1. Payment of VAT has been deferred by 3 months, for the period from 20 March 2020 until 30 June 2020. VAT liabilities which would normally be payable in this period will be suspended and taxpayers will have until the end of the 2020/2021 financial year to account for these liabilities. The government has confirmed that refunds and reclaims for this period will nevertheless be processed as normal. 

The offer is open to all businesses and will be automatically available, without the need to satisfy any conditions or (seemingly at the moment) complete any forms.

Whilst extremely welcome, businesses should be aware that this is ultimately only a cashflow saving and they will need to retain the right level of resources to pay the liabilities at the relevant time.

2. A similar deferral of liabilities will be in place in respect of income tax for the self-employed. Whilst they ordinarily would have been required to make payments on account by 31 July 2020, those payment will now be deferred until 31 January 2021. As with VAT, the offer is open to all self-employed taxpayers and is available automatically.

3. The government has announced a business rates retail holiday for all retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. As with the other benefits, the tax break is automatic and there is no specific action which businesses need to take. It will apply to the next bill issued by local authorities in April 2020. For businesses with multi use sites, businesses may seek to argue that relief applies to whole site (as predominantly retail, hospitality and leisure).

4. The government has also reminded businesses of the Time to Pay Scheme, which has been available for some time. It’s available to all businesses and self-employed people in financial distress and with outstanding tax liabilities. HMRC will consider how to support such business with their tax affairs on a case-by-case basis and depending on specific circumstances and liabilities. Whilst none of this is new, it will clearly be of relevance to more businesses as a result of COVID-19. HMRC’s dedicated helpline is 0800 0159 559.

As well as the tax breaks above, under the Jobs Retention Scheme, HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. Read more information and expert commentary in our insight Coronavirus job retention scheme: what do we know so far?

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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