Deferral_ of_ the_ 31st_ July_ Income_ Tax_ Payment
Amongst the measures, the government introduced to assist taxpayers with the onset of Coronavirus is that you are able to defer payment of the second payment on account due on the 31st July 2020 to the 31st January 2021, without any late interest implication. The Revenue seems to have assumed that everyone will defer the payment as the statements issued by them regarding the July liability have noted that this will now fall due January next year, however, the original intention was that deferral is for those whose businesses that have been adversely affected by the virus.
The 31st July 2020 liability can also be reduced if profits that are included in the 2020 tax return are lower than the previous year.
For those that have deferred payment, it must be remembered that on the 31st January 2021, as well as the deferred payment, the balancing payment for 2019/20 and the first payment on account for 2020/21 will fall due in the normal way. It may be that some will find that the burden at this time of facing a significant liability in January worrying. I suggest that as always communicating at an early stage with the Revenue to attempt to manage the situation is best. The government has announced extra resources to assist those struggling to pay their tax liabilities and in financial distress. This includes a dedicated HMRC coronavirus helpline 0800 0159 559. Support will include agreeing a bespoke Time to Pay arrangement.
If a time to pay arrangement is in place then the Revenue will not charge a penalty but interest will still be charged.
Please note that if your payment is late, interest currently at 2.60% per annum will be charged automatically from 31 January 2021 until the date on which the tax is paid. If the 2019/20 balancing payment is not made in full by 1st March 2021 a penalty of 5% will be payable on the amount outstanding at that date, with further 5% penalties after six and twelve months if the amount is still outstanding.
The main message is that if a taxpayer has difficulty in meeting the payment deadlines then communicating with HMRC will ensure that a reasonable arrangement can be made and offer peace of mind in these stressful times.