COVID-19 update – 1 May – VAT deferral and Parental Leave Pay changes

Here our experts provide you with the latest advice on deferring VAT payments and parental leave pay changes.

VAT deferral

Anyone wishing to defer their VAT payment that would ordinarily be payable by 7 May is reminded to cancel their direct debit in time. Payment by Direct Debit would ordinarily be collected on 10 May, but due to the bank holiday on Friday 8^th May, it will likely be collected on 7 May. To cancel the DD via the online VAT account or by contacting your bank. As agents, we can’t change your banking details.

HMRC has updated its guidance concerning the VAT deferral, confirming that annual account advance payments due between 20 March and 30 June can also be deferred, but not VAT MOSS payments or import VAT. Any deferred VAT will have to be paid on or before 31 March 2021.

Parental leave pay changes

The law has been changed so that parents who receive statutory pay while on furlough (SMP, SPP, SAP, or SPBP), are not disadvantaged. These types of statutory pay all rely on a calculation of average weekly earnings (AWE), in particular for statutory maternity pay (SMP). The calculation of an employee’s SMP entitlement is usually based on their average weekly earnings during the calculation period: the eight weeks leading up to the 14th week before their expected week of childbirth. The rules have been amended on the calculation of SMP for employees who have been furloughed under the Coronavirus Job Retention Scheme. For periods of maternity leave beginning on or after 25 April 2020, if an employee was furloughed and on reduced wages during any part of the calculation period, their SMP should be calculated using the pay they would have earned had they not been furloughed. The legislation providing for statutory pay to be based on usual, rather than reduced, earnings applies to the calculation of statutory paternity, adoption, shared parental and parental bereavement pay and maternity allowance.

Where, during the calculation period, an employee was in receipt of statutory sick pay (SSP) because they were self-isolating or off sick, their SMP will be calculated using their actual average pay during the period, including any weeks when they were in receipt of SSP. The amount of higher-rate SMP due will be reduced accordingly, or they may not be entitled to SMP at all if the reduced pay is less than the lower earnings limit for national insurance. The same would apply for employees on reduced hours because of the coronavirus (COVID-19) crisis during the calculation period. The legislation providing for statutory family-related pay to be based on usual earnings applies only to furloughed employees where a claim has been made under the Coronavirus Job Retention Scheme.

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