In these strange times, it’s good to know that the Government has introduced a handful of tax deferral measures, each designed to ease different financial pressures that may impact on businesses and individuals alike. ‘Cash is king’ as they say, and creating some breathing space when it comes to cash flow might be vital.
Businesses will not have to make VAT payments falling due in the period from 20 March to 30 June 2020. Instead, they will be given until 31 March 2021 to settle these, and any size of business can take advantage of this. There is no need to apply – the deferral is automatic if you want it. The other welcome news is that any deferred amounts will not be subject to interest or penalties as a result of late payment. Bear in mind that the VAT returns will still need to be submitted on time.
If you normally pay your own income tax liability via self-assessment, and you’re due to make a payment on account on or before 31 July 2020, this can be deferred until 31 January 2021. Like the VAT deferral, there is no need to contact HMRC to take advantage of this arrangement. However, HMRC have not yet clarified whether interest will be charged – usually, a delay in making a payment on account would attract an interest charge but no other penalty, so this may still be the case.
While there is no formal scheme in place to defer corporation tax payments, HMRC are typically allowing a three month period of grace to make payments of corporation tax. HMRC will need to be advised if you wish to take advantage of this, and in such cases, interest will be charged on any payments made after their due date.
Time to pay
There has always been the ability to contact HMRC to make a ‘time to pay’ arrangement if it’s not possible to pay your tax on time. However, in these difficult times, a specialist self-assessment department has been set up to deal with situations where the amount due is less than £10,000.
HMRC will need to know what the liability refers to, how long you would like to spread the cost over, and the affordability of the repayments. If the amount is greater than £10,000, or it relates to another type of tax, the existing system of making an arrangement continues, which employs a similar approach to setting up the arrangement, while also taking into account the impact of COVID19.
There is also a dedicated helpline (0800 024 1222) to support businesses and self-employed people who are unable to pay their tax due to the virus. Although interest accrues on amounts within an arrangement, in most cases any tax geared penalties are prevented as long as the agreement is maintained, so if this route appeals, action should be taken as soon as possible.
Remember, we are here to help. Get in touch if you would like our guidance on any of the above.