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VAT Deferral and Time to Pay

The Chancellor announced a VAT payments deferral on 20 March to support businesses with cash flow during the COVID-19 pandemic.

This means that all businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 30 June.

You therefore have until 31 March 2021 to pay any VAT deferred as a result of this announcement.

You do not need to inform HMRC if you wish to defer payment. You can opt in to the deferral simply by not making VAT payments due in this period.

If you pay by Direct Debit you should cancel this with your bank. You should do so in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.

HMRC stated that Interest will not be due if the payment has been deferred as a result of this announcement “HMRC will be inhibiting all default surcharges and interest will not be accrued on amounts deferred as a result of this announcement.”

In answer to a question about penalties, HMRC said that while surcharges would be “inhibited” during the deferral period, “Businesses need to continue to render their VAT return on time.”

Should you wish, you can continue to make payments as normal during the deferral period.

HMRC will also continue to pay repayment claims as normal.

You must continue to submit VAT returns as normal in order to take advantage of the VAT deferral scheme.

Time to Pay Corporation Tax or PAYE

Corporation Tax and PAYE payments must be paid in line with existing rules. For businesses who are struggling to pay their tax or PAYE bill on time, HMRC is also delivering an enhanced Time to Pay offer to fit the specific impacts of COVID-19.

Time to Pay is available to all businesses and individuals who are in temporary financial distress as a result of COVID-19 and are unable to pay their tax on time or have existing liabilities. HMRC has set up a dedicated helpline to enable those eligible to get practical help and advice which can be reached by calling 0800 0159 559. Opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm. The helpline will not be open on Bank Holidays. 

The helpline guidance states that such arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

These measures can include agreeing an instalment arrangement, suspending debt collection proceedings, and cancelling penalties and interest if an individual or business has administrative difficulties contacting or paying HMRC immediately.

Deferral of your Income Tax (Self-Assessment) payments

Income Tax Self-Assessment payments due on the 31 July 2020 may be deferred until 31 January 2021.

Eligibility

You are eligible if you are due to pay your second self-assessment ‘payment on account’ on 31 July. You do not need to be self-employed to be eligible for the deferment.

The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so.

How to access the scheme

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until January 2021.

Reduction of your ‘payments on account’

If you know that your tax liability for the tax year 5 April 2020 is going to be less than the previous year, we can apply to reduce your payment on account. In these difficult times, it might be an idea to try to complete your tax return before 31 July to enable you to calculate your actual tax liabilities due in July and also in January 2021. This would then provide you with an element of certainty concerning your tax liabilities moving forwards. Please do get in touch if you would like us to assist you with this.