Tax payment deadlines approaching - feeling the crunch?
Not only is 31 January the deadline for submitting self-assessment tax returns but it is also the date for payment of self-assessment tax liabilities. For many businesses, 31 January is also a VAT quarterly payment date (not to mention the normal monthly payments for PAYE tax due).
In the current economic climate many businesses and individuals are struggling to manage their cash flow and as a result are finding it difficult to meet current tax liabilities.
In recognition of these potential difficulties the Chancellor of the Exchequer, in his Pre-Budget Report last November, announced a commitment to help those taxpayers experiencing genuine problems in meeting their current tax liabilities (income tax, corporation tax, VAT, PAYE and tax due under the construction industry scheme (CIS)).
Shortly after the Chancellor's announcement, HM Revenue & Customs (HMRC) launched the Business Payments Support Service (BPSS) which enables businesses that are struggling to pay their tax liabilities on time to agree a deferment timetable without imposing the normal surcharges for late payment of tax (where an agreement has been reached in advance of the date the tax becomes due). Interest will continue to be charged (currently at 4.5%) on any unpaid amount.
The helpline is primarily aimed at individuals and small businesses but can be used by any taxpayers who are unable to make their tax payments on time. The level of detail required to be provided to HMRC largely depends on the level of debt which is to be deferred and the length of the deferment required. The aim of HMRC is to provide a decision on any request for deferral. The stated desire to provide a decision within 10 minutes appears to relate to the smaller less complex situations, where the debt is typically under £10,000.
Tracey Bentham, tax partner at PricewaterhouseCoopers LLP, said:
"In this difficult economic climate, HMRC is offering help to businesses and individuals that are facing genuine cash flow difficulties. In the six weeks since the start of this service, over 20,000 businesses have delayed paying more than £350 million of tax.
"It is important that businesses and individuals are proactive in approaching HMRC and that they do not wait for HMRC to start formal action to recover any unpaid tax which is due."
To make the process as smooth as possible businesses and individuals should be prepared to provide proof of financial hardship to HMRC prior to approaching them to agree a deferral. Taxpayers should also ensure that they are able to meet their ongoing tax payments during the time to pay arrangements and need to be careful not to find themselves in the same position in a few months time.
Those within the CIS may be concerned that their inability to pay may result in withdrawal of their gross payment status. However, HMRC has confirmed that entering into a time to pay arrangement will not affect their gross payment status provided that the agreement is reached before the due date for payment of the tax.
The PricewaterhouseCoopers LLP dos and don'ts when facing cash flow difficulties are:
Do
• Approach HMRC as soon as the cash flow problem is identified
• Make sure your cash flow forecasts take into account any future repayments due to HMRC
• Be prepared to be able to support your position with documentation if requested
Don't
• Wait until the last minute - it might take several days or longer to reach an agreement
• Commit to a payment schedule you will be unable to meet
• Approach HMRC for a deferral unless you have a genuine need to defer your tax payments
