COVID-19: HMRC Time to Pay arrangements
This article was last updated on 28 September at 10:05.
The uncertainty surrounding COVID-19 has left many reviewing personal and business cashflow forecasts for the coming months.
HMRC has set up a dedicated COVID-19 helpline (0800 024 1222) to assist any business or self-employed individual providing advice, support and tax instalment arrangements.
Lengthy delays have been experienced calling the helpline, it takes approximately one hour to speak with a call handler. If you are looking to discuss a tax liability with HMRC please make sure you have the following information to hand, you will only require the separate references if you are to discuss each separate tax:
- CT reference number
- VAT reference number
- PAYE reference number
- PAYE accounts office reference number
- UTR number for self-employed individuals
- Bank account number and sort code for the tax payment/direct debit.
Instalment arrangements should be agreed in advance of the payment due date(s) in order to avoid late payment penalties, these are separate from interest charges. Ensure all returns are submitted to HMRC prior to the due date and at least 24 hours in advance of your call.
HMRC are very understanding of the circumstances and have agreed for some of our clients to defer tax payments for up to three months and instalment plans of up to 12 months. Their scope for agreeing instalment plans is constantly evolving.
Self-assessment and Time to Pay arrangements
It was previously announced that for the self-employed, self-assessment Income Tax payments due on 31 July 2020 are to be deferred until 31 January 2021. This means both the 31 July 2020 and 31 January 2021 payments become due on 31 January 2021. This is automatic with no application required. No interest will be charged during the deferral period. HMRC also updated its guidance (on 25 March) to make it clear that the deferral of self-assessment Income Tax payments applies to all self-assessment tax payers, not just the self-employed.
Time to Pay has been further extended as a result of the Winter Economy Plan. Applications for Time to Pay on all Income Tax and Capital Gains Tax due on 31 January 2021, over 12 months to 31 January 2022, will be accepted online by HMRC where the tax due is less than £30,00. Bespoke arrangements where the tax is greater than £30,000 can be agreed through HMRC’s telephone service.
VAT deferral and Time to Pay (TTP) arrangements
The Government announced on 20 March that no VAT liabilities need be paid between 20 March 2020 and 30 June 2020. This is automatic, and no applications need to be made to HMRC. It was originally announced that organisations would have until 31 March 2021 to pay off any accumulated liabilities. In his Winter Economy Plan, the Chancellor announced that rather than paying a lump sum in full at the end March, organisations will be able to make 11 smaller interest-free payments during the 2021-22 financial year. This deferral is not mandatory, and organisations can continue to pay their VAT liabilities if they wish.
If organisations do wish to take advantage of the deferral and are set up with direct debits to pay their VAT, they should cancel them, as otherwise the banking system will continue to take the direct debits automatically and HMRC cannot cancel direct debits on a taxpayer’s behalf.
VAT returns should continue to be submitted as normal. The VAT return periods affected by this deferral are returns ending in February, March and April due for payment in April, May and June respectively. It will not be possible to submit a return for the periods after April on 30 June 2020, and defer payment for this or subsequent returns as payments for these periods do not legally become due for payment until after the end of the deferral period.
HMRC has now also confirmed that deferral will apply to advance payments under the annual accounting scheme, as well as payments on account which fall due between 20 March and 30 June. Where balancing payments fall due after 30 June, then the amount payable is the amount shown as due on the VAT return in Box 5 less any deferred POAs made between 20 March and 30 June.
HMRC has confirmed that the deferral applies to all entities which are registered for UK VAT.
For VAT amounts which become due to HMRC outside of the deferral period HMRC has announced that it is increasing the number of staff who will look at Time To Pay (TTP) arrangements and will take a more sympathetic approach to requests for TTP. Ordinarily HMRC would not look at a request to pay off a VAT debt for a period in excess of six months, but after the financial crisis in 2008 we did see HMRC accept requests to pay in instalments for periods of up to a year.
PAYE returns should continue to be submitted as normal. We understand that the HMRC COVID-19 helpline can currently provide a PAYE deferral of up to three months from the payment due date.
HMRC guidance and advice is ever evolving, but the key message is if you are unable to settle a tax liability on time, contact HMRC before the liability becomes due for payment. Falling to do so will result in penalties in addition to interest payments.
Should you require a payment plan you can contact the Payment Support Service (0300 200 3835) on Monday to Friday between 08:00 and 16:00.