Tax bills looming? three ways to ease the pain
UPDATE 19TH JANUARY 2021.
Here’s some more info about these schemes:
You will need to choose how many installments you will need to spread your tax bill over in 2021, but all the late paid tax will accrue interest at 2.6% until it is paid.
The installment plan must be set up no later than 60 days after the due date for the tax, which means the time to pay agreement must be in place by 31 March. If the 2019/20 tax debt is still outstanding at 31 March 2021, and no payment plan is agreed, an automatic penalty will be imposed at 5% of the outstanding tax.
Here is the link for the automatic self assessment TIME TO PAY scheme – which you can apply for yourself using your government gateway account.
For the deferral of self assessment tax to be accepted, these criteria need to be met:
You must agree to pay the tax monthly by direct debit, with a target of clearing the debt within 12 months:
- have submitted your 2019/20 self-assessment tax return
- have no earlier tax returns outstanding
- your tax debt must be at least £32 and not exceed £30,000
- and you must have no other tax installment plans in place.
If any of these conditions are not met the system will deliver the result: “not eligible for an online payment plan”.
However, you will need to have submitted your self assessment, and it seems, accounting to AccountingWeb, that you need to wait 72 hours before you apply for the Time To Pay scheme.
“One problem could be that HMRC has the 2019/20 SA tax return, but has not processed it yet, so the tax liability for the year hasn’t yet fed into taxpayer’s personal tax account. This can take up to 72 hours after the SA return is submitted.
There have also been problems with HMRC having to use manual intervention to process some tax returns that include claims for the transferable marriage allowance or entrepreneurs’ relief. Such manual intervention will slow up the processing of the return.”
If you run into difficulties, here’s some info:
Where the self-serve tax deferral system says “no”, the taxpayer or the tax agent, can call the self-assessment payment helpline on 0300 200 3822 to negotiate a reasonable time to pay plan. This service is open from 8am to 6pm on weekdays.
This helpline should always be used if the total tax debt exceeds £30,000.
Before calling HMRC have all of the following to hand:
- taxpayer’s UTR number or NI number
- taxpayer’s name and address
- a contact telephone number
- details of the tax payment to be deferred
- details of any tax repayments your are waiting for
Although trading volumes in 2020 were reduced for many businesses due to the Covid-19 pandemic, the 2020/21 trading income will include three SEISS grants paid so far, and any local authority business grants received.
Be careful when postponing class 2 NIC due for 2019/20, as if that is not paid by 31 January 2021, the tax year will not count as a completed year in the taxpayer’s NIC record.
Thought we’d start the year off with a blog post intended to help pretty much everyone who has to pay tax/self assessment/VAT. So we’ll dispense with the banalities about the situation we’re in and dive straight in! We’re here for you in 2021 as we have been for the last twenty years. Please do get in touch if you’d like to have a chat about your business.
Lowering your payments on Account
1) You’ll be aware that the payments at the end of January are for two aspects – the tax that is still due from your accounts up to April 2020 and the payments ‘on account’ which are half what the revenue expects you to have to pay, for the year you are currently in, based on the figures from last year.
However, you may have had a year with a lower profit than usual. And this means you can apply to pay less tax ‘on account’ at the end of the month. Well, we can apply for this for you. It’s easier if we do it. We can work out what we think you are likely to have to pay in tax and then apply on your behalf to have it reduced. For the end of January as well as the end of July.
This might help with your cash flow perhaps?
If we reduce it too far and it does not cover your final total, there will be interest to pay, but it’s certainly worth us checking with you to see if you can reduce that advance payment. Please email David@theaccountancypractice.com or ring 01763 257882
Time to Pay scheme
2) Did you defer your July payment ‘on account’ last year? this payment is now due, along with any tax owing and payment on account for this year.
However, depending on how things have been going for you, you might want to take advantage of a ‘Time to Pay’ scheme being offered by HMRC. Which gives you an extra year to pay your due taxes in installments.
There are some quite specific criteria:
You can set up a payment plan to spread the cost of your
latest Self Assessment bill 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 do not need to contact HMRC if you set up a payment plan online.
Call the Self Assessment helpline if you’re not eligible for a payment plan or cannot use the online service.
Self Assessment Payment Helpline
Telephone: 0300 200 3822
VAT deferral options
3) Did you defer the VAT payment for a payment in the period 20th March and 30th June 2020? if so, this payment is approaching it’s deadline. Have you got the money to pay this at the end of March this year?
If not, we wanted to give you the heads up that this will be possible to be paid in installments over the following year, between end of March 2021 and end of March 2022.
However, unlike the reduction of your payments on account above, this one you have to do it yourself. We cannot do it for you.
Here’s the lowdown:
Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly installments, interest free. All installments must be paid by the end of March 2022.
The scheme will allow you to:
- pay your deferred VAT in installments without adding interest
- select the number of installments from 2 to 11 equal monthly payments
To use this scheme you must:
- still have deferred VAT to pay
- be up to date with your VAT returns
- opt in before the end of March 2021
- pay the first installment before the end of March 2021
- be able to pay the deferred VAT by Direct Debit
If you opt in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.
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. Corrections received after 31 December 2020 may not show in your deferred VAT balance
- 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 installments you’ll need, from 2 to 11 months.
THE SCHEME PORTAL HAS NOT OPENED YET, BUT WE WANTED TO LET YOU KNOW ABOUT IT. WE’LL SEND THE LINK IN A NEWSLETTER WHEN IT’S ANNOUNCED.
Meanwhile of course, if you want to talk to us about this, just email David@theaccountancypractice.com or Adam@theaccountancypractice.com or pick up the phone and call us 01763 257882.