Self-Assessment 2020 payments deferment on account due Coronavirus has been recently introduced by the UK Government. Check what you need to do if you would like to defer the income tax payments on the account due by 31st of January. What payments can be deferred?
These payments are:
- The balancing payment of income tax for the previous tax year (2019/20). This will be the total amount of capital gains tax and income tax. The payments will also be for Class 2 and 4 NIC, for the year minus the first payment on the account, and
- The first payment for the 2020/21 tax year
The Chancellor recently announced that all self-assessment 2020 taxpayers who need to make a payment in January of up to £30,000 can now use self-service time. This allows them them, to pay facility so that they can agree a plan with HMRC to spread payments over a 12 month period. This was launched on the 1st of October 2020.
In order to use the facility, the taxpayer in question will need a Government Gateway account. They will also need to have:
- No outstanding income tax returns (This means the 2019/20 tax return will need to be filed)
- No tax debts
- No time-to-pay arrangements and
- The debt should be between £32 and £30,000
Taxpayers who have self-assessment liabilities of up to £30,000 who are considering setting up a time-to-pay arrangement but don’t meet the above required conditions should immediately contact the helpline.
Taxpayers should ideally set up this arrangement before the 31st of January 2021. HMRC guidance states that this facility can be used to set up this arrangemen up to 60 days after the due date. However, if the arrangement has not been set up by the 3rd of March 2021, a late payment penalty will be charged. This payment tends to be 5% of the outstanding tax.
Please note, if you cannot pay on time due to a lack of money this will not be considered as a reasonable excuse for cancelling the late payment penalty.
The regular pay rules apply to automated agreements and as long as the taxpayer keeps to the schedule, they should not receive any penalties.
Interest will be added to any tax that is paid late and with take effect from the 31st of January 2021.
The taxpayer will be required to have a direct debit set up so that self-assessment 2020 payments can be scheduled. The taxpayer, should they be unable to keep up with the payments should contact HMRC as soon as possible. If the taxpayer does not make an agreement, HMRC can start proceedings so that the tax is paid. HMRC can also recover the amount from the taxpayer’s bank account.
The self-service arrangement is likely to have been announced with anticipation that many taxpayers might be unable to pay on time. Using an automated process for those who have a liability of less than £30,000 ensures helpline staff have more time to handle larger liabilities.
Taxpayers with tax liabilities of more than £30,000
Taxpayers who have liabilities of more than £30,000 can also spread their payments. However, they will need to contact the Coronavirus time-to-pay helpline.
The above guidance regarding the usual time to pay rules still applies, but it’s important that they have called the helpline to negotiate an arrangement.
Determining the tax liability due on the 31st of January 2021
It tends to be better if the taxpayer has negotiated their own arrangement with HMRC However, they will still need to know how much they are due to pay on the 31st of January 2021.
Advisers are able to use the time to pay announcement to contact their clients who still need to provide their 2019/20 tax return information. They should also encourage them to get all of their information together as quickly as they can.
If the income for the 2020/21 tax year seems lower than the 2019/20 tax year, clients can be advised to contact HMRC to ask to reduce their payments onto account. However, they should also be made aware that the payments received under the self-employment income support scheme will be taxed in the 2020/21 tax year. Please visit HMRC Taxation of Coronavirus (COVID-19) support payments and self-assessment guidance for more information.
Further guidance and support available from our Customer Service Team