Insights

Whilst tax due on 31 July 2020 by self-assessment taxpayers is now deferred for collection until 31 January 2021 due to coronavirus disruption, there has currently been no such tax deferral announced for corporation tax payments due by companies. Unless such a deferral is announced, many company directors will be forced to negotiate extra time to pay using the official scheme on offer.

This article outlines how to go about it.

When to make contact: Get in touch with HMRC as soon as difficulty making payment is expected and usually one to two weeks in advance of the due date for payment. Before making contact ensure that returns are up to date and the liability has been established.

Cash flow forecasts and budgets: Have financial forecasts and a statement of assets and liabilities available before making contact with HMRC. You will need to make an offer of what payment you can initially make and then suggest ongoing regular payments. HMRC will usually want to set up a monthly payment plan with collection by direct debit over the agreed period. Most HMRC debt management contact centre staff have the authority to agree time to pay over a period of up to 12 months, but debts larger than £100,000 may have to be referred internally within HMRC.

Agree an amount that is sustainable: If you reach a time to pay agreement with HMRC but subsequently do not honour it at any point during the agreement period, it will be very difficult to get HMRC to re-establish it. In addition, they will be more reluctant to make agreements with you in the future. Therefore if your circumstances change, contact HMRC to renegotiate the arrangements well before you miss any payments.

Expect robust questioning: HMRC staff may be more understanding in the current environment, but usually negotiating time to pay can feel quite intrusive. HMRC need to be made aware of all information which might be relevant to the payment difficulties.

Which debts to prioritise: In usual circumstances, HMRC is more willing to consider agreeing time to pay for profits based taxes such as income tax and corporation tax, than for taxes such as VAT and employees’ PAYE and national insurance contributions, which businesses are effectively collecting on behalf of the exchequer. VAT payments have already been deferred in the current environment together with self-assessment tax due on 31 July 2020.

Late payment penalties: One advantage of using the Time to Pay scheme is that late payment penalties will not be charged if the arrangement is in place when penalties arise. HMRC may now be more willing to waive late payment penalties given the current situation.

Interest: In normal circumstances HMRC does not waive interest unless the delay in making payment is directly attributable to HMRC, but this may change in the current situation.

If you need to contact HMRC, a dedicated COVID-19 helpline has been established, and the details are available here: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/coronavirus-covid-19-helpline

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