Government announces further payment help for clients
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The Winter Economy Plan (see Follow up ) announced the VAT Deferral New Payment Scheme, which is applicable to any of your clients who deferred their VAT payment due between March and June 2020. The key point is that they can now opt to make up to eleven small repayments of the deferred amount in the year to 31 March 2022.
Pro advice. Initially, the full amount was to be paid by 31 March 2021.
The other new announcement was an enhancement to time to pay for self-assessment. Clients that delayed paying their second payment on account (POA) for 2019/20 may benefit from this. Originally this was to be made good by 31 January 2021, but they now have a further twelve months should they need it.
If you have clients who paid in July 2020, they can benefit as well. The new enhancement also applies to income tax payments due in January 2021, so will include the balancing payment for 2019/20 and the first POA for 2020/21.
Getting back on track
It’s important for clients to understand that these measures merely push back the payment date. To get back on track, clients need to know what they can afford, and when. Prepare a cash- flow forecast, however rough and ready, then appraise how and when to clear the backlog.
Rather than putting off the day of reckoning, clients can still settle up before the original deadlines. HMRC advises that anyone who can pay should do so.
Pro advice. Clients can pay in full by the deadline or make ad hoc instalment payments. That applies to either deferred VAT or income tax.
Clients can control their payments. To pay deferred income tax before 31 January 2021, they can make whatever payments they like, via the usual online payment system, at whatever intervals they like. Or if they want something more structured, they can set up regular payments using HMRC’s budget payment plan. Similarly, they can pay instalments of the VAT to suit cash flow.
Pro advice. If they want to settle deferred VAT before the Deferral New Payment Scheme begins, make sure clients know it’s down to them to arrange it. It won’t be collected automatically via their usual direct debit.
How to benefit
The income tax deferral provided in July 2020 was automatic. This time around it’s different and clients have to apply. As long as they don’t owe more than £30,000 in self-assessment liabilities, they can simply set up a payment plan online and it should get approved on the spot. They don’t have to phone HMRC.
If they owe more than £30,000, or want longer to pay, they’re not ruled out, but they’ll have to phone HMRC, and more admin is involved. HMRC is likely to want cash-flow forecasts, for instance. For the VAT scheme, HMRC will release details of how to opt in early in 2021.
Follow up https://www.tips-and-advice.co.uk , Download Zone, yr.7, iss.6
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