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HMRC 'Time to Pay' service

A further deferral opportunity for self-assessment tax

Nick Latimer, Partner, Private Clients
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Part of Rishi Sunak’s Winter Economy Plan, announced in late September, included an opportunity for self-assessment taxpayers to defer tax bills by another 12 months, and HMRC has now provided more information.

The deferral opportunity relates to self-assessment tax payments due 31 January 2021, and those with liabilities of up to £30,000 can apply online to spread their liability into monthly payments, subject to interest at HMRCs published rates, currently 2.6% per year,  without penalty.

The taxpayer has no obligation to declare that they have been adversely impacted by COVID-19.

The requirements are that:

  • there are no outstanding tax returns
  • there are no other tax debts
  • there are no other HMRC time to pay arrangements
  • the Self-Assessment tax bill is between £32 and £30,000
  • it is no more than 60 days since the tax was due for payment.

The application must be made by the taxpayer (not an agent) through the government gateway. More detail is available here.

Given HMRC normally requires these arrangements to be put in place before the tax payment is due, we would recommend taxpayers finalise and submit their 2019/20 tax returns, and apply for the Time to Pay service well in advance of 31 January 2021.

If the conditions above are not met, for example because the taxpayer has other deferred taxes as a result of COVID-19, it is still possible to set up a Time to Pay arrangement, but this would need to be done over the telephone.

This is good news and further respite for those affected by the pandemic. In the early stages of the crisis, financial assistance was offered to self-assessment tax payers, by way of an interest free deferral of their 31 July 2020 payment, on account of 2019/20 tax liabilities to 31 January 2021. This deferral didn’t need to be claimed, and there were no penalties for not paying the tax, and many took advantage of the opportunity meaning a potentially large bill in early 2021, while the pandemic continues to hold back trade.

Clearly those taxpayers reliant on trading profits or private company dividends, who have been impacted by the pandemic may expect to see a fall in their taxable income, even with the benefit of taxable COVID-19 grants. This may make it appropriate to reduce the January 2021 payment on account of the 2020/21 tax year, but any outstanding tax in relation to the year to 5 April 2020 will remain payable in absence of a Time to Pay arrangement.  Where a Time to Pay arrangement is not in place, penalties can be levied on late payment of tax, starting at 5% of the tax still not paid at the start of March 2021 and increasing over time.

If you would like to discuss the issues raised in this article to see how we can help you manage this challenging period, get in touch with your usual Crowe contact.

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Nick Latimer
Nick Latimer
Partner, Private Clients