Coronavirus VAT Deferral Scheme – January 2021 Update
A new payment scheme will be opened by HMRC shortly to allow for payments of VAT originally deferred between 20th March 2020 and June 2020 to be paid in 11 interest free instalments. All instalments must be paid by the end of March 2022.
You will need to opt into this scheme and we will update you further once the scheme is open.
Before opting in you must:
- create your own Government Gateway account if you don’t already have one
- submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
- correct errors on your VAT returns as soon as possible
- make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
You should also:
- pay what you can as soon as possible to allow us to show the correct deferred VAT balance
- consider the number of equal instalments you’ll need, from 2 to 11 months
October 2020 Update
On the 24th September the chancellor announced that businesses who deferred VAT due from 20th March to 30th June 2020 will now have the option to pay in smaller payments over a longer period of time. Smaller payments can now be made up to the end of March 2022 and will be interest free.
You will need to opt into this scheme, more information will become available in the coming months regarding this.
Self- Assessment Tax
Check what you need to do after 31 July 2020 if you chose to defer your second payment on account for the 2019 to 2020 tax year.
HMRC have produced a summary of your options, however there is no extended deferral mechanism past 31st January 2021.
You can apply for Time To Pay – if you know that you cannot make your payments then the sooner you do this the better.
If your outstanding self-assessment tax is less than £30,000 then you can apply online for time to pay via your Personal Tax Account.
You can also use this option to set up any regular payment for self-assessment should you wish to put a budget plan in place. For more information on ways to pay click here.
Corporation Tax and Pay As You Earn
No deferral has been granted in respect of Corporation Tax liabilities or PAYE/NIC payments, businesses that attempt to get up and running again as the lockdown eases may find themselves in difficulty funding these liabilities, especially when business was tough even before lockdown.
If your business is facing that challenge during this time, you may be asking: will HMRC give me more time to pay Corporation Tax or PAYE/NIC liabilities if I cannot pay them on time? The answer is, they may, if you make a request for a Time to Pay arrangement with them.
Some key points you need to know before contacting HMRC about TTP
- When to apply? As soon as possible if a tax payer thinks they will have difficulties making their next payment on a timely basis.
- What do you need to prepare beforehand? Full information concerning the individual or business’s financial situation should be available, including but not limited to details of bank loans presently held, details of application for additional bank funding, the sale of assets, etc. This is because questions asked by HMRC can be detailed to the extreme.
- Will there be interest involved? In any TTP arrangements, forward interest will be charged where appropriate.
It’s important to act now
While in recent months, HMRC Debt Management teams appear to have been applying a light touch in relation to the collection of arrears, this will not last forever. With this in mind, if your business has a tax debt, you should approach the appropriate Debt Management Team and reach an agreement to clear the arrears in a formal arrangement over a period of time.