Sarah Halsted

Written by: Sarah Halsted

Sarah Halsted

Technical Associate Director

Coronavirus – deferment extension to duty and import VAT payments

HMRC announced on Good Friday that the payment of duty and import VAT due via duty deferment accounts on 15 April 2020 can be delayed, subject to a financial hardship test.

Many businesses that bring goods into the UK from outside the EU operate deferment accounts, which allow payment of import VAT and duty to be delayed until the 15th day of the month following the calendar month in which the goods are brought into the country. HMRC requires such accounts to be supported by a bank or insurance company guarantee.

Payments to settle deferment accounts are not covered by the general coronavirus deferral until 31 March 2021 of VAT payments due from 20 March to 30 June 2020. As a result, importers under financial pressure because of the coronavirus shutdown have been increasingly concerned that failure to abide by the terms of their deferment arrangements could mean that their deferment account might be suspended and that HMRC may call on its guarantee to settle the unpaid duty and import VAT. In light of the challenges faced by importers at this time, HMRC sent an announcement to the Chartered Institute of Taxation over the Easter weekend for immediate action.

If businesses are experiencing severe financial difficulty because of coronavirus and are unable to pay the duties and import VAT due on 15 April 2020, they can contact HMRC for approval to enter an extended payment period. As part of the approval process, the business will need to explain how coronavirus has affected their business finances and cash flow.

If a business does not hold a duty deferment account, similar conditions apply for registered Importers who pay cash or an equivalent for duty and import VAT.

HMRC says all requests for an extended time to pay for deferred duty and import VAT will be considered on a case-by-case basis and could be refused. Individual circumstances may give rise to specific conditions being placed on the business or a requirement for a financial guarantee.

This is a welcome easement from HMRC, and a common-sense measure to assist businesses facing large bills for customs charges such as duty and import VAT while the current restrictions on trading are in place. However, HMRC has so far only mentioned the deferment payment due on 15 April 2020. It remains to be seen whether a similar easement will be allowed for deferment payments due in subsequent months, when financial difficulties for importers may not have eased to any significant degree.

Also, unlike the earlier VAT deferral which was granted automatically, there are conditions attached to this extension which has to be agreed and approved by HMRC. It is therefore essential that importers take action and call HMRC to agree a delay. It may be necessary to pause rather than cancel the direct debit, so it is also important to contact your bank to check the correct procedure. It would also be prudent to also check the terms of your guarantee.

Finally, this is another example of HMRC releasing important clarifications of its coronavirus easements through third parties, such as professional bodies, or by direct emails to particular stakeholders. With matters of such high importance, we would urge HMRC to promptly post full information on the Government website where it is accessible to all.

Add comments

Coronavirus: staying ahead of the risks

Discover the key considerations that you need to be making for your business in the midst of this global health crisis.

Find out more

Share your thoughts

*These fields are mandatory