01162822177 enquiries@rowleyturton.com

To defer or not to defer your tax bill

21st July 2020

tax, planning, ISA, business, HMRC, self-assessment, income tax, VAT

As part of their response to the Covid-19 pandemic, HMRC are letting businesses defer VAT payments due between 20th March and 30th June this year. 

Businesses will only be able to defer payments made quarterly and monthly for the period ending in February, March, and April. Deferral is automatic, so you need not apply if you think that your business would benefit. 

In addition, HMRC are letting taxpayers who owe a self-assessment payment on account from the 2019-2020 tax year defer until 31st January 2021. The original payment date would have been 31st July this year. It’s worth noting that 31st January is the same due date as your January self-assessment tax liability, so you could end up making a rather large payment on this day. 

Businesses and self-employed workers can also apply for a ‘Time to Pay’ arrangement. This entails a pre-agreed debt repayment plan over a period of 6-12 months.

The VAT deferral scheme is designed to keep some businesses alive in the short term. However, there could be financial implications for delaying a payment which could become more significant in an uncertain business environment, especially if there is a second outbreak of Covid-19.

 With the risk of a second outbreak of the pandemic remaining a possibility, it’s worth getting a grasp of the impacts of delaying your payment before you defer. It could be a wise idea to speak to an accountant if you’re unsure.

If you defer, you will have to pay by 31st March 2021. It’s worth noting that this could leave you with a larger bill than usual and there is a chance that it could see you facing cash flow challenges in the new year, during what could be a period of fragile recovery.

To avoid increased costs next year, you can choose to pay your tax bill as you normally would. HMRC are actively encouraging businesses and the self-employed to behave as ‘good citizens’ and pay any tax they owe on time, helping the government at a time where it is busy taking on emergency loans to fund its response to the crisis.

Some businesses are opting for monthly VAT repayments, due to fears of not being able to cover a single colossal tax bill in January. By repaying in instalments over the next few months, these businesses will avoid the catch-up payment hitting in one go.

Subscribe to receive your FREE regular newsletter

Award, Investment, Life, Pension, Moneyfacts, 2015, Estate, Tax, Planner, of the Year, Best, Adviser   PFS, Pension Transfer, Gold, Standard, Final Salary, DB, Defined Benefit  Independent Financial Adviser, IFA, Independent, Financial, Adviser, Advisor    

Retirement Planner, award, firm of the year, midlands, 2018, pensions, advice Rowley Turton (IFA) Limited profile Chartered Financial Planners, Chartered Financial Planner, Chartered, Financial, Planner

Rowley Turton (IFA) Ltd is authorised and regulated by the Financial Conduct Authority. Financial Services Register No: 457946 http://www.fca.org.uk/register.

Rowley Turton (IFA) Ltd Registered Address: Bramcote House, Ervington Court, Meridian Business Park, Leicester, LE19 1WL. Registered in England & Wales, No. 3145431.

Neither Rowley Turton (IFA) Ltd nor its representatives can be held responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The Financial Conduct Authority does not regulate National Savings or some forms of mortgage, tax planning, taxation and trust advice, offshore investments or school fees planning.

The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at http://www.financial-ombudsman.org.uk.

The information contained within this site is subject to the UK regulatory regime and is therefore targeted primarily at consumers based in the UK.

Please read our Privacy Statement before completing any enquiry form or before sending an email to us.