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Income tax self-assessment – payments on account due 31 July 2020

In any “normal” year most self-employed taxpayers and those with higher levels of investment income would be expecting to make the second payment on account in respect of their 2019/20 income tax liability on 31 July. 

Some time ago however it was announced that those taxpayers who would find it difficult to make their 31 July 2020 payment due to the impact of Coronavirus would be able to delay making that payment until 31 January 2021, the normal date for making any balancing payment in respect of the 2019/20 tax year.

No interest or penalties will be charged by HMRC in respect of payments on account which are deferred using this facility and taxpayers do not have to advise HMRC that they are choosing to defer.  Taxpayers also have the option to make the payment as normal where they can do so.  Taxpayers who pay their payments on account by direct debit should cancel their direct debit in time to ensure that the payment is not taken automatically.

There is no requirement to make a formal statement that the taxpayer is having difficulties making the payment nor is there an explicit requirement to retain records to support the fact that making the payment would cause difficulties.   Similarly there is no suggestion that HMRC would take compliance action in the event they believe any payments should not have been deferred.  This contrasts sharply with the Self Employed Income Support Scheme where a taxpayer claiming a grant under the scheme is required to make a statement to the effect their business has been adversely affected by the outbreak and would be expected to be able to demonstrate this if required by HMRC.  

On the face of it therefore this would appear to all intents and purposes to be an automatic deferral.  However the guidance issued by HMRC is clear that the deferral is aimed at those who would find it difficult to make their payment on account due to the effect of the Coronavirus outbreak.  Individuals should therefore consider their own circumstances to determine whether this applies to them and decide on that basis whether to defer their payment or not.  Those for whom the Coronavirus outbreak has not adversely affected their ability to pay the second payment on account on the due date should look to make the payment as normal.

For those who do choose to defer the payment it is critical to remember that this is just a deferral and payment in full will be due by 31 January 2021 along with any balancing payment due in respect of the 2019/20 year and the first payment on account for the 2020/21 tax year – potentially meaning a significant cash outflow at that time.  Payments which are made late will at that stage fall within the normal interest and penalties regime for self-assessment payments. 

It is therefore essential that consideration is given on an ongoing basis to the affordability of making these payments on the due date.  If as the payment date approaches it appears likely that an individual will find it difficult to make the payment in full by 31 January they should consider contacting HMRC’s time to pay service on 0300 200 3822 or the HMRC Coronavirus Helpline (0800 024 1222) to discuss the potential for a “time to pay” arrangement.  While it is difficult to predict what level of support around the Coronavirus outbreak will still be available towards the end of the calendar year, the earlier dialogue on such matters is started with HMRC the better.

06 July 2020 | Paul Brown, Tax Partner

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