In his recent statement, the Chancellor announced several VAT and self-assessment tax measures to help taxpayers struggling with cash flow due to COVID-19.
Here’s a summary of what he had to say.
VAT deferral
Businesses which deferred VAT payments due in March to June 2020 have the option to spread their VAT payments in 11 equal instalments over the financial year 2021/22. This is instead of paying the VAT in full at the end of March 2021.
There will be no interest charges if you take up this new payment scheme.
All businesses that took advantage of VAT deferral are eligible. But they will need to opt into the scheme – deferral is not automatic.
The procedure for opting-in will be announced early 2021.
Reduced VAT rate for the hospitality and tourism sector
The temporary reduced VAT rate of 5% for the hospitality and tourism industry will now run until 31 March 2021.
More time to pay self-assessment tax bills due by 31 January 2021
The self-employed and other self-assessment taxpayers have been given more time to pay any taxes due on 31 January 2021.
This follows on from the self-assessment tax deferral granted in July 2020.
Taxpayers with self-assessment taxes payable of up to £30,000 will now be able to use HMRC’s ‘Time to Pay’ facility to agree a plan to pay their tax liability over an additional 12 months.
This means that any payments deferred from July 2020 and those due by 31 January 2021 can now be paid over the 12 months to 31 January 2022.
To take advantage of this delayed payment scheme, taxpayers have to apply to HMRC.
Once you’ve completed your 2019/20 self-assessment tax return, you can use HMRC’s on-line self-serve ‘Time to Pay’ Service to set up a direct debit and pay taxes due in monthly instalments, up to a 12-month period.
If you want to set up an on-line self-serve ‘Time to Pay’ arrangement, you’ll need to meet the following conditions:
- You have no outstanding tax returns.
- You have no other tax debts.
- You have no other HMRC tax payments set up.
- Your total self-assessment taxes due are between £32 and £30,000.
- It must be no more than 60 days since the tax was due for payment.
If you don’t meet the above on-line/self-serve requirements, you might still qualify for a ‘Time to Pay’ arrangement but you’ll have to call HMRC to set this up.
If you do set up a ‘Time to Pay’ arrangement, you’ll have to pay interest on any tax paid late.
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