We are seeing an increasing number of queries from our clients who would like to understand what the consequences may be if they deferred tax payments and what options may be available to them and their business to manage their taxation liabilities in the current climate.
This is becoming even more important as employers look to ensure the welfare of their people, with many people working remotely and having less access to the day to day office information which they may normally have to hand.
We have set out below an overview of:
The government has announced a VAT payment holiday until the end of June with the balance to be cleared by the end of the year.
The government has announced a deferral until 31 January 2021 for the self-employed.
For corporation tax, HMRC will not start chasing for payment until a tax return has been submitted. It is at this point that HMRC will have information about the tax which is due and HMRC’s Collector of Taxes will normally, assuming the tax payment date deadline has been reached, start to seek to collect any unpaid tax which is due.
For VAT and PAYE/NIC late payments, HMRC will seek to chase soon after monthly or quarterly deadlines have been missed.
Delaying submitting your corporate tax return may provide a short reprieve from being chased by the Collector of Taxes for outstanding tax. However, it should be borne in mind that non-submission of tax returns on time can ordinarily lead to late filing penalties being imposed by HMRC and may be taken into account when HMRC consider a taxpayers general tax compliance record.
The above penalties apply for all monthly, quarterly or annual PAYE, CIS deductions and Class 1 NIC.
For annual payments such as employers’ Class 1A and Class 1B NICs, the additional late penalties noted above will apply after the due date with a 5% penalty being charged at 30 days, six months and 12 months.
In these difficult times, businesses may wish to consider whether late payment of their tax in the short term, represents a cost effective funding option when compared to their other borrowing costs.
The UK Government has set up an HMRC tax hotline, 0800 024 1222 that can be called to request delays in paying VAT, corporate tax, PAYE/NIC etc. It is our understanding that HMRC are being sympathetic, particularly to businesses with a good payment and compliance record. Although currently our clients that have tried to call the helpline are experiencing delays in being able to speak with anyone.
For more information, read HMRC’s guidance on using the hotline.
HMRC will discuss your specific circumstances to explore:
Before calling it is recommended that you have to hand details of:
In terms of contacting HMRC, it is often better if the call comes from the company/business in the first instance.
If you try to speak to the helpline and consistently cannot get through then we would suggest writing to HMRC at the address included on the link above to evidence that you have tried to contact them. This in itself will not provide any help, although will assist evidence that as a business you are seeking to take all reasonable steps to reach some form of agreement with HMRC.
As noted above, large and very large companies make corporation tax payments by way of quarterly instalment payments.
Each instalment payment should be based on the expected taxable profit outturn for the full accounting period, with each instalment based on the revised expectation at that point in time. For example, by the third instalment date, 75% of the company’s tax due should have been paid based on the expected full year results.
Where taxable profits are predicted to be lower as a consequence of events, such as COVID-19, then future quarterly instalment payments should be scaled back accordingly. Whereas, in the unlikely event profits are expected to be higher, then future payments should ‘top-up’ the current position.
If companies believe that they have now overpaid quarterly instalment payments based on their new revised full year projects then they can contact HMRC to seek a tax refund of the overpaid tax.
This is not linked to a business’s tax position although is a scheme that is going to be administered by HMRC.
Under the scheme all UK employers will be able to access support to continue to pay part of their employees’ salary for those employees that otherwise would be laid off during the current COVID-19 crisis.
HMRC will reimburse employers 80% of furloughed workers wage costs, up to a cap of £2,500 a month.
To be able to access the scheme you will need to do the following:
It should be noted that in order for a worker to be classified as a ‘furloughed worker’ they will not be able to carry out any work for the employer.
HMRC are currently working urgently to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers.
We will provide more information as HMRC makes it available, read our insight on support for employers for more information.
In the current environment, many businesses may find themselves having competing priorities for how they utilise their financial resources. The government have announced a number of other measures and financial reliefs to support businesses as a consequence of the current COVID-19 pandemic.
However, delaying tax filings and payments is an option that a number of businesses are also considering. As noted above, there are various penalties and additional interest costs which can arise as a consequence of taking this action, although for some, the interest cost, particularly for corporation tax payments, may be considered a good short term funding option when considered against their other costs.
For any business that is considering this option it is worth considering HMRC’s helpline for assistance, although our current client experience is that many clients are experiencing difficulties in getting through to speak to anyone.
For any further help and assistance for your business, please do contact your usual Crowe contact.
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