By David Watkinson
AS you read this you will be resting from the Xmas festivities and looking forward to a new year that will hopefully be both prosperous and healthy. However, anyone who has a tax liability to pay has one hurdle to face before they can fully relax – the dreaded 31st January deadline to both submit their tax return and to pay any resulting deadline.
The recent past has been very difficult for many people in business. The financial difficulties faced by many in the hospitality sector caused by the rapid spread of the new Omicron variant of Covid has been well publicised over the past few weeks. In view of the unusual circumstances HM Revenue & Customs (HMRC) have taken a lenient view on “time to pay” requests. In fact, HMRC have reminded taxpayers of the option to set up a “self-serve time to pay” arrangement if they are unable to pay their self assessment bill by the due date.
This option has been open to people with smaller liabilities for some time. However, the limit for a self-serve time to pay arrangement was increased during the early part of the pandemic, and HMRC have now announced that the limit will remain at £30,000 tax due in respect of this January’s liability.
If taxpayers can’t pay their 2020/21 self assessment (SA) tax liability in full by the due date, which is generally 31 January 2022, then they can set up their own time to pay arrangement online if they:
• have filed their tax return for 2020/21;
• owe less than £30,000;
• are within 60 days of the payment deadline; and,
• plan to pay their debt off within the next 12 months or less.
To do so then the taxpayer should go to https://www.gov.uk/difficulties-paying-hmrc/pay-in-instalments
If the taxpayer owes more than £30,000, or need longer to pay, then they should phone the self-assessment payment helpline on 0300 200 3822 to make an arrangement.
As stated above, the service is available for 60 days from the due date. However, if the liability is not paid within 30 days of the due date then a surcharge of 5% of the unpaid tax is generally payable. This is usually 1st March. To avoid this late payment surcharge, it is necessary for the taxpayer to set up the arrangement within the first 30 days following the due date.
The service has proved to be very popular to date. In fact, more than 20,000 taxpayers have used it since April 2021 to spread £46m of tax due for 2020/21. The previous year, over 123,000 taxpayers used it to spread the cost of £460m of liabilities in respect of the 2019/20 tax year.
Unfortunately, this self-serve time to pay facility is not available must be set up by the taxpayers themselves. Agents cannot do so on behalf of their clients as HMRC require a direct debit to be set up and they will only accept a direct debit mandates which has been set up by the taxpayers themselves.
All taxpayers should also consider any liability that may arise in respect of the year 2021/22. A liability will arise on 31st January for a payment on account of this tax, and that payment on account will be based on 50% of the 2020/21 liability. A further liability of the same amount will arise on 31st July. Any taxpayer, whether or not they take advantage of a time to pay arrangement, should consider these payments on account. These payments on account will be reduced when the 2022 tax return is submitted to be based on 50% of the final liability. The payments on account will not be increased if the liability is higher. If they think that their liability in 2021/22 will be lower than their liability for 2020/21 then the taxpayer can reduce these payments on account based on those figures or estimates.
It is important to remember that any payment that is made after the due date will carry interest on a daily basis.
WatkinsonBlack have considerable experience in all areas of taxation and business services, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Our office is now open during all normal office hours. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
