The COVID-19 pandemic has directly impacted businesses everywhere on the planet, with many companies facing financial strain thanks to an economic downturn.
In an attempt to supply relief to entrepreneurs and little businesses negatively suffering from the coronavirus, the united kingdom government has announced some changes regarding the power for eligible businesses or persons to defer VAT and tax payments.
As a little business owner, you'll also want to defer your tax payments for other reasons, like to take care of positive income or to strategically scale your operations. If you're curious to get some help with this, Cheap Accountants in London features a team of accounting and tax experts who will assist you through the entire process, as well as connecting you to a reputable tax resolution specialist once your business is ready to sit down.
In this article, we’ll assist you to learn when it is sensible for you to defer your tax payments and the way to try to so consistent with HMRC’s guidelines
Why you'll want to defer your tax payment
Regardless of size and industry, every business within the UK must file taxes with HMRC. As mentioned above, your specific tax requirements will vary counting on your business structure, also as your income, profits, and a number of other conditions.
But filing on time might not always be possible. Sometimes, business owners may find themselves in a difficult financial position, which may impact their ability to pay tax by the initial deadline.
This financial disruption might be thanks to various reasons, such as:
You’re struggling to satisfy sales targets thanks to low product demand
You’re within the middle of restructuring your internal processes
You need to pay off your bank loans
You have engaged an excessive amount of money in advertising
Most small businesses are already working with a decent budget and any quiet financial disruption can significantly impact their bottom line.
Another reason you'll want to defer your tax payments is due to the COVID-19 pandemic. Research shows that around 80% of SMEs have reported a decrease in revenue due to COVID-19.
To help businesses facing financial difficulty thanks to the coronavirus, HMRC has introduced a replacement system that permits VAT registered businesses to defer their VAT payments and certain individuals who work for themselves (often sole proprietors) to defer their tax payments to a later date.
Additionally, HMRC is allowing businesses negatively suffering from COVID-19 to defer payment of other sorts of taxes by requesting a Time to Pay Arrangement.
These extensions will help to make sure that eligible businesses have enough income to survive during this difficult time.
Finally, you'll prefer to defer your tax payments albeit you’re not facing any financial issues whatsoever. for instance, you'll simply want to possess some cash-in-hand for investing during a business project or a key new product or service that you simply will help to expand your customer base.
Whatever the case could also be, you'll defer your tax payments as long as you’re staying within the provided HMRC guidelines.
How to defer your tax payment
Let’s examine exactly the way to defer your tax payment in accordance with HMRC’s rules.
If you’re unable to pay the tax due to coronavirus
As mentioned above, thanks to the impact of COVID-19 on UK businesses, the govt is offering VAT registered businesses and qualifying sole proprietors the power to defer paying tax on certain VAT and tax payments.
Additionally, HMRC is allowing businesses negatively suffering from COVID-19 to defer payment of other sorts of taxes under Time to Pay Arrangements.
Defer VAT payment
If you probably did defer your VAT return payment before that date, you've got until on or before 31 March 2021 to pay your owed VAT. If you think that you won’t be ready to pay your VAT fully by the deadline, you'll contact HMRC’s Time To Pay (TTP) service to request to pay in installments.
Request Time to Pay Arrangement
‘Time to Pay’ literally means you would like longer to pay your taxes, thus fixing a Time to Pay Arrangement online allows you to pay your bill in installments.
If you are doing plan to found out a Time to Pay Arrangement, you'll need the subsequent information before you contact HMRC for state support:
Your reference number
The specific amount of your bill that you’re struggling to pay and therefore the reasons why you're facing difficulties
Your attempts so far at trying to accumulate the funds to pay your bill
The estimated amount that you simply pays immediately and the way long you'll get to pay the remainder of the bill off
Your checking account details
HMRC will decide if you're eligible for delayed payment or not. If they feel the necessity, they'll ask you for more evidence before they create a final judgment.
If you are doing get granted longer to pay, you'll negotiate with HMRC to make a decision on what new due dates are realistic and possible. If you finish up missing these new due dates and making a late payment, you'll be charged late payment interest for the delay.
If you're not granted longer to pay, and you miss your payments, HMRC will begin enforcement action to retrieve the cash from you. To avoid this, contact HMRC the instant you recognize that you simply won’t be ready to pay on time.
Delay Self Assessment payment on account
Regarding eligible sole proprietors that want to defer tax payments, HMRC is allowing businesses to delay making their second payment on account for the 2019-2020 tax year.
You are eligible if you are:
Registered within the UK for Self Assessment, or
*Finding it difficult to form your second payment on account by 31 July 2020 thanks to financial disruption from coronavirus
Consequences of deferring your tax payment
Deferring tax payments may add up for your business in some situations, but it comes with its own set of consequences.
If you select to form delayed tax payments in January 2021 rather than paying on the initial deadline in July 2020, know that you’ll now need to make this payment alongside the opposite tax bills due next year.
This will approach the quantity of tax you pay on just one occasion, potentially disrupting your business income.
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