Deferral of payment of taxes

The UK Government has announced some measures to allow for deferral of taxes in order to assist those businesses that are struggling financially due to COVID-19.  We would advise clients to weigh up these options very carefully to ensure that they can pay any deferred taxes at a future date, whilst continuing to meet other known obligations.

The measures in place are as follows:

1.      VAT

Deferral

If you are a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to defer the payment until 31 March 2021 (however, see New Payment Scheme below).  This is an automatic offer with no application to HMRC required.  All UK businesses are eligible.  Taxpayers will be given until 31 March 2021 to pay any VAT deferred during this period. HMRC will not charge interest or penalties on any amounts deferred.

UK VAT returns should still be submitted on time and as per the normal filing deadline, which is 1 month and 7 days after the period end.

Any VAT refunds and reclaims during this period will continue to be paid by the Government to VAT registered businesses as normal.

If you pay your VAT by direct debit, you should contact your bank to cancel your direct debit as soon as you can or cancel online. VAT payments due following the end of the deferral period must be paid as normal and direct debits reinstated.

You don’t have to defer your VAT payments and can continue to make payments as normal.

New Payment Scheme

A part of his Winter Economy Plan, The Chancellor announced on 24th September 2020, that those businesses who chose to defer their VAT liabilities for the period due between 20th March 2020 and 30th June 2020, will not (as previously required) have to pay the VAT owed in a single lump sum on 31st March 2021.  Instead, businesses will given more time to pay and have the option to make payment in 11 smaller interest-free instalments during the 2021-22 financial year.

More guidance on this payment scheme can be found at  Pay VAT deferred due to coronavirus (COVID-19) - GOV.UK (www.gov.uk)

2.      Income Tax

Deferral – phase 1

If you’re due to pay a self-assessment payment on account by 31 July 2020, but the impact of the coronavirus is making it difficult to make payment, then you may defer payment until 31 January 2021.  You do not need to be self-employed to be eligible for the deferment.  The deferment is optional and there is no need to apply for this deferral.  No penalties or interest for late payment will apply during this deferral period. 

Deferral – phase 2

In his Winter Economy Plan, The Chancellor announced on 24th September 2020 a separate additional 12-month extension from HMRC on the ‘Time to Pay’ self-service facility.  This means that payments deferred from 1st July 2020, and those due on 31st  January 2021, will now not need to be paid until 31st January 2022.