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If you cannot pay your tax on time

JR Watson

1st May 2020

Economic Advice & Solutions

JR Watson

By Sue Leathem

Partner

JR Watson & Co

BUSINESSES and individuals find sometimes that they cannot pay tax they owe when it is due. This might happen for several reasons including poor trading following a good year, a large bad debt, ill health or an unforeseen large expense.

HMRC is not unreasonable and it is pointless hoping the tax bill will go away. It will not.

You should contact HMRC as soon as possible and arrange a 'time to pay' agreement. You can apply online or by telephone. Before making contact, you should work out:

* Your income per week or month.

* Your fixed commitments such as council tax, rent, mortgage and utilities.

* What you think you can afford to pay per month.

For a business, it may be difficult to predict how much surplus cash there will be after paying the wage bill and occupation costs, but a business owner needs to go through the same process.

A 'time to pay' arrangement is intended to be flexible, allowing you to settle arrears over a period of up to 12 months. Having reached an agreement with HMRC, you can always pay more than the agreed monthly sum, which will be collected by direct debit. Should you find you cannot meet the agreed sum, again, you must contact HMRC as soon as possible. If your bank dishonours your direct debit there will be a bank charge, costing you money that you do not have.

Two additional short-term reliefs are presently available as part of the COVID-19 strategy:

1 Self-assessment taxpayers due to make a payment on 31 July 2020 can delay payment until 31 January 2021. If you wish to pay the tax, you can do so, but you will not be chased if you delay.

2 Payment of VAT falling due between 21 March 2020 and 30 June 2020 will be deferred until 31 January 2021.

These are intended to help individuals and businesses manage cash flow during this difficult time.

In addition, employers can claim for the cost of salaries, National Insurance and pension contributions paid to staff formally furloughed as part of their COVID-19 strategy. Up to 80 per cent of the usual salary, ignoring bonuses, can be claimed. The grant will be taxable. It cannot be claimed by organisations receiving Government support, including councils and providers of NHS services.

For further information, contact JR Watson & Co. Telephone 01604 630745 or visit the website at www.jrwatson.co.uk