Options for deferring tax payments

Measures have been put in place to help individuals and companies who are struggling to make tax payments. We are very keen to have conversations with any of you who anticipate difficulties in making tax payments. The following information is useful reading before contacting your usual adviser for a more detailed discussion about your particular challenges and the best way to approach HMRC, if necessary.

Firstly, the Government has announced that the payment dates of two taxes have automatically been moved back:

  • VAT – a VAT payment holiday until the end of June has been introduced, with the balance to be cleared by 31 March 2021
  • Income Tax (for individuals in the self assessment system) – the 31 July 2020 payments on account are deferred until 31 January 2021

Provided that any deferred tax is paid by the revised due dates, no interest or penalties will be charged on the amounts deferred.

Secondly, an HMRC helpline has been set up to deal with calls about delays to payments of corporation tax, PAYE/NIC as well as arrangements to spread payments of VAT and income tax outside of the above automatic deferrals. There has always been scope to seek HMRC agreement to delayed payments of tax, known as ‘time to pay arrangements’ and HMRC recognise that requests for such arrangements will become more common as individuals and businesses try to manage cash flows through the coming months. 

For those who are unable to pay taxes due to coronavirus disruption, HMRC are prepared to discuss your specific circumstances to explore:

  • agreeing an instalment arrangement.
  • suspending debt collection proceedings.
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.

We suggest that you arrange a telephone conversation with us to agree your strategy before contacting HMRC. The details HMRC will wish to discuss include:

  • an outline of the business including size, number of employees, recent history, basic financial position etc.
  • why the business needs the additional time to pay and what other existing measures have been put in place.
  • what other funding options and self-help measures have been considered and are being undertaken.
  • what action has been taken with suppliers and customers to delay payments / seek payments on account.
  • how long the help is likely to be needed for – is it a bridge until particular customer payments come in or is it anticipated to be for a few weeks or months?
  • when does the business foresee returning to stability and being able to repay the liabilities to HMRC?

Finally, for larger companies, consideration should be given to revising corporate tax quarterly instalment payments. Where taxable profits are predicted to be lower as a consequence of COVID-19, then future quarterly instalment payments should be scaled back accordingly. If companies believe that they have already overpaid quarterly instalment payments based on their new revised full year profits, they can contact HMRC to seek a tax refund of the overpaid tax.

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