Deadlines, deadlines … an integral part of the tax year.
But what difference has recent government support made to the tax we have to pay and when?
Even as observers speculate that the Chancellor is on the brink of waiving fines for late payment, there are already schemes in place to support business.
Due to coronavirus (COVID-19), HMRC allowed businesses to delay making their July 2020 payments on account until 31 January 2021.
But as that January deadline approaches for deferred payments, we have to decide whether to pay, or set up a Time to Pay arrangement through HMRC.
The pros and cons
Well, the good news is that if you pay up in full before 31 January 2021, you’ll not be charged interest or penalties. In effect, you got a six-month interest-free loan from the Government.
However if funds are still an issue, you can pay your tax by instalments through a “Time To Pay” arrangement if:
- you owe £30,000 or less
- you do not have any other payment plans or debts with HMRC
- your tax returns are up to date
- it’s less than 60 days after the payment deadline
You also do not need to contact HMRC directly as you can set up a payment plan online.
You will need to wait at least 48 hours from filing your return before you can set up your Time to Pay arrangement online.
However, this isn’t a pain-free option and, more importantly, it isn’t an interest-free option.
Late payment penalties are charged when tax remains unpaid 30 days, 6 months and 12 months after its due date for payment – this is currently at a rate of 2.60%.
You can avoid them if you enter into a Time to Pay arrangement before they become due and you pay all the tax owing under that arrangement on time. Interest is payable on Time to Pay instalments at a rate of 0.5%.
Now, this is new ground for us all. HMRC is not obliged to enter into these arrangements and historically has seen it as a last resort.
They would have suggested seeking a loan facility from a bank or other lender, but different times call for different solutions.
What we don’t know is how HMRC will deal with Time to Pay in the future, and when and how they will call in the debts.
However having access to this scheme could be a welcome lifeline for some businesses in the meantime.
Of course, it all emphasises the important part that planning and organisation play in efficient cashflow for businesses. But I would say that, wouldn’t I?
- The self-assessment payment helpline is open Monday to Friday, 8am to 4pm, and is on 0300 200 3822. If you cannot pay any other tax bills because of coronavirus, contact the HMRC coronavirus (COVID-19) helpline on 0800 024 1222.
- If you fancy a free no obligation chat with TLC Accounts regarding your bookkeeping, self-assessment returns or payroll, get in touch at email@example.com