Much attention has been paid to the Government’s Job Protection Scheme.
It has sure been critical for individuals. But has it actually helped businesses much ? Not really.
What has been critical for businesses is the ability to defer VAT payments until March 2021. This has saved major cashflow for businesses who have been able to keep trading.
Like the furlough scheme, the vat deferment was implemented for a limited period.
HMRC have extended the furlough scheme.
But they have NOT extended the VAT deferment scheme.
So all VAT returns due for payment after 30th June are payable in full.
Businesses have suffered increased costs in the last period, with many topping up furlough payments, or because of increased operational costs, e.g. health & safety measures. Or they have continued to incur costs with little income to cover this.
Business bank accounts all across the country are depleted.
Some think that with reduced sales, there’s less VAT to pay over. True to some extent. But many have continued trading, while suffering increased costs. For many, profit margins have been decimated.
If deferment of VAT payments is not extended, watch out for additional business failures in the months ahead.
If VAT is not paid on time, there are automatic penalties and interest applied. These are unrecoverable costs.
This is a tipping point issue.
If you want to still have an economy, that is.