COVID-19: Should I choose to defer payment?.

Article | Stephen Bartlett-Rawlings | 6th July 2020

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31 July 2020 payment on account

Those who are experiencing difficulties due to the impact of Coronavirus will instinctively welcome the news that they can choose to defer the second payment on account for 2019/20, usually payable on 31 July, until 31 January 2021.  

Are you eligible to defer your 31 July 2020 payment on account?

HMRC’s guidance states you can defer your tax payment if you are finding it difficult to pay due to the impact of the Coronavirus.

Examples of why you may be finding it difficult to pay could include:

  • You are unable to work because you have lost your job, you are shielding or self-isolating, you are on sick leave or you have caring responsibilities due to Coronavirus.
  • Your business has closed or been scaled down due to your supply chain being interrupted, you have fewer customers, your staff are unable to work, or you have had contracts cancelled.
  • You own a rental property, but your tenants have requested a rent holiday or have ceased to pay rent.
  • You rely on your investment income or capital which has reduced due to the economic effect of the Coronavirus.

These are some examples of the potential impact of Coronavirus, the list is not exhaustive, and you may have other reasons why the Coronavirus has affected your ability to pay your tax.

If you are having difficulty paying your tax and wish to defer your payment you should retain contemporaneous evidence of the impact Coronavirus is having on you.

Should you choose to defer payment?

The decision to defer is not as simple as just forgetting about the liability for 6 months.

The ability to defer payment is just that; the liability is still due for payment but delayed until the end of January 2021.  However, 31 January is also the due date for the balancing payment for the 2019/20 tax year and the first payment on account for 2020/21.   For many, this doubling up of tax payments, so soon after Christmas, may prove to be more traumatic than making the July payment on time.

Failure to make the payments by 31 January 2021 will also lead to interest charges and, in some instances, penalties.

Whilst the economic position may be uncertain, we recommend those that can make the payment by 31 July 2020 continue to do so.  

For those who are unable to make the payment due to being adversely affected by Coronavirus and the lockdown, there are three possible options:

1. Choose to defer the payment by not making it, but ensure it is paid in full by 31 January; or

2. Where possible, it may well be better to pay this in instalments over the next few months (i.e. making regular bite-size weekly or monthly payments if unable to make a lump sum); or

3. To discuss with us, for those significantly impacted, if we can help you agree a Time to Pay arrangement with HMRC.

If you choose to defer your tax payment please let us know as it will be important to complete your 2019/20 tax return as soon as possible, so that you understand your tax position and can better manage your cash flow. 

Please contact us if you would like to discuss this further.

About the author

Stephen Bartlett-Rawlings

Stephen has great experience advising individuals on their income tax, capital gains tax and inheritance tax position.

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