Guidance on Time to Pay & Payment Deferral

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. It is available NOW.

VAT & Self Assessment Payment Deferral

Please remember the UK government is supporting businesses during the coronavirus pandemic by deferring VAT and self assessment payments for six months.  Under the government's proposals VAT payments being deferred will not now need to be made until the end of the tax year and no application is required.

VAT

The deferral for VAT payments applies from 20 March 2020 until 30 June 2020. All VAT registered traders are eligible. This will generally mean the deferral of one quarter’s VAT: the payment due on 7 April, 7 May or 7 June 2020 or the monthly payments due on each of these dates. This is an automatic offer and no application is required. Businesses will not need to make a VAT payment during this period.

Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

Customers who normally pay by direct debit should cancel their direct debit if they are unable to pay, via online banking or contact your bank. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return.

We cannot set up direct debit mandates on behalf of taxpayers. Taxpayers have until the end of the 2020/21 tax year to pay any liabilities that accumulate during the deferral period. VAT refunds and reclaims will be paid by the government as normal. Businesses should continue to file their VAT returns by the due date.

 

Income Tax

For the self-employed, self assessment income tax payments due on the 31 July 2020 (the second payment on account for 2019/20) will be deferred until the 31 January 2021.  This will not require an application.

This deferral is available to anyone under the self assessment system.  If you are due to pay a self- assessment payment on account on 31 July 2020 then you are eligible for the deferment. The deferment is intended to assist self-assessment taxpayers, including those who are self-employed, who are suffering hardship as a result of the coronavirus. Penalties and interest for late payment will not be charged in the deferral period. The deferment is optional and any persons still able to pay their second self-assessment payment on account on 31 July 2020 should still do so.

 

This is an automatic offer and no application is required. Very few taxpayers pay their self assessment liabilities by direct debit because the system requires a separate direct debit mandate to set up for each individual payment. Any taxpayer that qualifies for the deferral and has already set up a direct debit mandate for the payment on account due on 31 July 2020 should consider cancelling it, this can be completed via online banking or contacting your bank..

Self assessment returns should still be filed by their due date and it may be advantageous to file the 2019/20 return as soon as possible after 5 April 2020. This might facilitate planning for the tax payment due in January 2021 and perhaps crystallise any refund due, including as a result of any loss relief available.

No penalties or interest for late payment will be charged in the deferral period.

Time to Pay

Who can request Time to Pay?

You are eligible if:

1. Your business pays tax to the UK Government

2. Your business has outstanding tax liabilities

How do I request Time to Pay?

If you’ve missed, or are worried about missing, your next tax payment due to coronavirus, please contact HMRC. You can also call the HMRC helpline for advice on 0800 0159 559. Opening hours are Monday to Friday 8am to 4pm

Before You Call-Preparation is Key

1. When is the best time to call?

In general it is advisable to contact HMRC as soon as difficulty making payment is expected. However, HMRC’s systems do not easily facilitate setting up a payment arrangement too far in advance, so the best time to phone HMRC is usually one to two weeks in advance of the due date for payment.

2. Make sure returns are up-to-date

If returns are up to date and the correct liability has been established, HMRC is more amenable to agreeing time to pay.

3. Have financial forecasts and a statement of assets and liabilities at hand

HMRC will expect the taxpayer to make the best offer they can and will not usually make suggestions about the amount it will accept as a regular payment.

4. You may be requested to set up a regular monthly payment plan

If HMRC agree time to pay, expect to set up a regular monthly payment plan with collection by direct debit. Most HMRC debt management contact centre staff have authority to agree time to pay over a period of up to 12 months. Longer periods can be arranged but usually need to be escalated to more senior HMRC staff. The Tax Faculty understands that debts of more than £100,000 may have to be referred internally within HMRC. Short suspensions of collection to allow the taxpayer to take a specific action which would enable them to pay are sometimes possible.

5. Stay calm and professional

We don’t know to what extent HMRC staff will be more sympathetic to requests for time to pay in the current environment but in normal circumstances negotiating time to pay can involve what feels like personal and intrusive questioning. It is important to make HMRC aware of all information which might be relevant to the payment difficulties, as calmly and professionally as is possible in what may well be extremely difficult circumstances.

6. What can the business afford?

It is often better to conclude a phone call to HMRC having failed to reach an agreement than to agree to an arrangement which the business can’t afford. If a time to pay agreement is not kept to it is difficult to get them to re-establish it and they will be more reluctant to make agreements in the future. It is advisable to contact HMRC if circumstances change, to renegotiate the arrangement before missing any payments. If a formal time to pay arrangement cannot be reached it is usually advisable for the taxpayer to pay what they can, when they can, as this shows willingness to pay and may delay further enforcement action by HMRC (although this approach may not be appropriate if insolvency is likely and further advice should be sought in this situation). NB. No agreement may be better than an unaffordable agreement.

7. Your future tax liabilities must be paid in full when due

A standard term of HMRC time to pay agreements is that future tax liabilities are paid in full as they fall due. If this is not possible it is necessary to contact HMRC again to renegotiate the arrangement to include the new debt. HMRC is often reluctant to agree repeated requests for time to pay but may be more amenable in the current situation.

8. Prioritising your debts

HMRC is usually more willing to consider agreeing time to pay for profits based taxes such as income tax and corporation tax than for taxes such as VAT and employees’ PAYE and national insurance contributions, which businesses are effectively collecting on behalf of the exchequer. The usual advice is to prioritise paying VAT and employer liabilities as HMRC pursues these more actively. We don’t yet know whether this will change in the current situation; there has been some speculation that the Government may be minded to focus assistance on VAT and employer liabilities but no announcement has been made.

9. Avoid late payment penalties

An advantage of a formal time to pay arrangement is that late payment penalties will not be charged if the arrangement is in place at the trigger date for the penalties. We don’t yet know whether HMRC will be more willing to waive late payment penalties in the current situation but the helpline page suggests that the cancellation of penalties will at least be explored. 

10. Will interest be waived?

In normal circumstances HMRC does not waive interest unless the delay in making payment is somehow directly attributable to HMRC. We don’t yet know whether HMRC will be more willing to waive interest in the current situation but the helpline page suggests that the cancelling of interest will at least be explored.

 

If you would like further support, please email your usual contact at our office.

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