The year 2020 will forever be known for Coronavirus and the chaos it wrought on our towns, cities and communities. In a plight to help soften the financial impact of the global pandemic, the UK government introduced several schemes, amongst which was the tax deferral and time to pay schemes.
However, as the festive season approaches, it becomes important for businesses and individuals alike to be aware of the deferred liabilities that will soon become due and payable.
VAT payments deferral scheme
For the period 20 March until 30 June 2020, businesses where given the ability to defer paying any VAT liabilities arising from quarterly and monthly VAT return payments for the periods ending February, March and April 2020; as well as, payments on account and annual accounting advance payments due in that period until 31 March 2021.
However, as recently announced in the Chancellor's Winter Economy plan, businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period. This would entail opting-in to a scheme which would allow the VAT liabilities due between 20 March and 30 June 2020 to be paid in instalments up to the end of March 2022, interest free.
Therefore, unless a business specifically opts-in to the scheme to pay the liabilities originally deferred in the period 20 March until 30 June 2020 in instalments up to 31 March 2022, the deferred amounts must be paid in full on or before 31 March 2021.
Payments on account for self-assessment
Income tax self-assessment payments that were due on 31 July 2020 were deferred until 31 January 2021. However, as part of the Chancellor's Winter Economy plan, taxpayers with up to £30,000 of self-assessment liabilities due by 31 January 2021, whether deferred from July 2020 or otherwise due by 31 January under self-assessment, can make payment in 12 monthly instalments under the time to pay arrangements. This means the final payment would not be due until January 2022. Taxpayers using the self-serve time to pay will be required to pay interest on tax owed from 1 February 2021. No eligibility criteria has yet to be released and it may be that taxpayers will need to provide evidence that they are unable to pay on time.
Time to pay agreements
All businesses and self-employed people in financial distress and with outstanding tax liabilities were able to apply for support with their tax affairs through HMRC's Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. It is essential for taxpayers to be aware of the dates that any tax liabilities will become due per the tailored agreement and ensure that they have the necessary funds available or to contact HMRC before the tax debt becomes due.
Taxpayers should monitor their position as we reach the end of 2020 and ensure to have the relevant funds available in order to pay the deferred tax liabilities as they become due; or, if necessary, they must ensure to make the appropriate claims to enable the payments to rather be paid in instalments.
If you would like support with any of these areas, please get in touch with your local GMP office to speak to one of our partners.