HM Revenue & Customs (HMRC) has announced that its online VAT Deferral New Payment Scheme is now open for applications to help businesses arrange smaller monthly repayments of deferred VAT.

Under the New Payment Scheme, you can repay VAT deferred between 20 March and 30 June 2020 in up to 11 instalments from March 2021 (the length of repayment and number of instalments will depend on when you join).

To use the online service, you must:

• Join the scheme yourself – agents cannot directly assist you;
• Have deferred VAT to pay;
• Be up to date with VAT return filings for the last four years;
• Correct any errors on VAT returns, as soon as possible;
• Make sure you know how much VAT you owe;
• Pay the first instalment when you join; and
• Pay instalments by Direct Debit (there are alternative payment methods of payment on request).

If you intend to use this scheme, you will need to opt-in online between 23 February and 21 June 2021.

Click here to join the scheme today

Businesses can also repay their deferred VAT in full by 31 March 2021 or agree extra help to pay with HMRC by calling 0800 024 1222 by 30 June 2021.

Businesses may be charged interest or a penalty if they do not pay the deferred VAT in full by 31 March, opt-in to the VAT Deferral New Payment Scheme or seek additional help to repay deferred VAT by the deadlines outlined above.

If a business decides to use the New Payment Scheme it will not affect its ability to request a Time to Pay arrangement from HMRC in future.

Although agents, such as accountants, can’t join the scheme on your behalf, our team can help you get your VAT affairs in order and figure out how much VAT you may owe. To find out more, please contact us. 

Following HM Revenue & Customs’ (HMRC) announcement that it is waiving late filing penalties for Self-Assessment taxpayers who file by 28 February, it has now announced that it is waiving the five per cent late payment penalty that usually applies from 3 March for taxpayers who pay or set up a payment plan by 1 April 2021.

Self-Assessment taxpayers who are unable to pay all the tax they owe can set up a self-serve Time to Pay arrangement online, if the debt is less than £30,000, allowing them to pay in monthly instalments until January 2022.

Meanwhile, those who owe more than £30,000 can contact HMRC by phone on 0300 200 3822 to request a Time to Pay arrangement.

Crucially, however, interest continues to accrue on outstanding Self-Assessment tax payments and has been doing so since 1 February.

If you have not yet filed your Self-Assessment tax return, you should do so before 28 February to avoid a £100 penalty.

Please contact us today to find out more about our services for Self-Assessment taxpayers.

Any business that deferred VAT payments due between 20 March and 30 June 2020 as a result of the Coronavirus pandemic, must now consider how they will repay this outstanding tax.

They can choose from the following options in order to do this:

• Pay the deferred VAT in full by 31 March 2021;
• Join the VAT Deferral New Payment Scheme (VDNPS); or
• Contact HM Revenue & Customs (HMRC) to agree extra help to pay by 30 June 2021.

The VDNPS will remain open between 23 February and 21 June 2021 and will provide businesses with the option to pay deferred VAT in equal interest-free instalments.

Taxpayers will be given the option to make between two and 11 instalments to suit their needs (the length of repayment may depend on when a business joins the scheme).

Businesses that are already on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, will be invited to join the VDNPS in March.

Other businesses wishing to use the scheme will need to apply online. To use the online service, they must:

• Join the scheme themselves – agents cannot directly assist them;
• Still have deferred VAT to pay;
• Be up to date with their VAT return filings;
• Pay the first instalment when they join; and
• Pay instalments by Direct Debit (there are alternative payment methods for those without access to Direct Debit on request).

Before joining, businesses must:

• Obtain a Government Gateway account – if they do not already have one;
• Submit any outstanding VAT returns from the last four years;
• Correct any errors on VAT returns as soon as possible; and
• Make sure they know how much they owe, including the amount originally deferred and how much you may have already paid.

If a business decides to opt-in to the New Payment Scheme it will not affect its ability to request a Time to Pay arrangement from HMRC for other debts and outstanding tax payments in future.

Businesses who are unable to use the scheme or that need extra help repaying deferred tax must call HMRC on 0800 024 1222 by 30 June 2021.

Businesses may be charged interest or a penalty if they do not pay the deferred VAT in full, opt-in to the VDNPS or seek additional help to repay deferred VAT by the deadlines outlined above.

The Government’s guidance on the VDNPS can be found in full by clicking here.

The Government has announced changes to the Bounce Back Loan Scheme (BBLS) available to small businesses in the UK that will give companies longer to repay what they have borrowed.

Around 1.4 million small and medium-sized businesses have taken out a loan since they were introduced last year, amounting to around £45 billion of financial support.

Under the current scheme, firms get interest-free loans for the first year. However, many businesses that took out a loan last year will have to begin repaying the money lent to them in May.

With large parts of the country likely to remain in lockdown for many weeks to come, the Government is making changes to its existing ‘Pay as you Grow’ (PAYG) initiative that are designed to give small businesses greater support to repay their loan, without it adversely affecting their recovery.

Under the new arrangements, businesses will have the option to:

• Extend the length of the loan from six years to 10
• Make interest-only payments for six months, with the option to use this up to three times during the life of the loan
• Pause repayments entirely for up to six months.

The Treasury has said that the PAYG scheme gives borrowers the flexibility to tailor their repayment schedule to meet the needs of their business.

The initiative will now be available to all borrowers from their first repayment, rather than after six repayments have been made.

This will mean that businesses can choose to make no payments on their loans until 18 months after they originally took them out.

Applying for a Bounce Back Loan

Although the Government is already looking at how existing borrowers can repay the money that they have borrowed, the BBLS remains open to new claims until the end of March.

It enables small and medium-sized businesses to borrow between £2,000 and up to 25 per cent of their turnover (capped at £50,000).

The BBLS is 100 per cent backed by the Government, which means that only minimal checks are required by lenders. Following the first interest-free year, a fixed interest rate of 2.5 per cent a year applies.

If you already have a loan but borrowed less than you were entitled to, you can still top up your existing loan to your maximum amount.

Businesses that intend to use the BBLS must make an application or top up an existing loan by the 31 March 2021.

If you haven’t yet made an application for the scheme or would like help with the PAYG scheme, please contact us.

Due to a mismatch of earnings thresholds, basic rate taxpayers may unexpectedly come under the scope of the High Income Child Benefit Charge in April.

The Low Incomes Tax Reform Group (LITRG) has issued a warning to families that they may be subject to a tax charge when claiming Child Benefit due to a discrepancy between two earnings thresholds used by the Government.

This is because the High Income Child Benefit Charge (HICBC), which begins to be levied where either parent earns £50,000 or more, will no longer align with the thresholds for higher rate taxpayers later this year, which means those paying the lowest rate of tax may now face new charges.

The higher rate tax threshold continues to rise each year, and while it currently stands at £50,000, this figure will rise to £50,270 from 6 April 2021.

The HICBC, however, has remained unchanged since 2013. Those found within the charge will see one per cent of the child benefit they receive effectively withdrawn via the charge for every £100 earned above £50,000. This means that those earning £60,000 or more lose all the benefit through tax.

The Low Incomes Tax Reform Group, part of the Chartered Institute of Taxation (CIOT), has said that the policy “no longer meet its original intent to only target higher rate taxpayers”.

It has suggested that the Government should compensate for inflation and rising wages by raising the £50,000 income threshold to at least £60,000. It also believes that the point at which Child Benefit is fully recovered should increase from £60,000 to £75,000.

LITRG believes that the structure of the charge encourages those liable for the tax charge not to claim Child Benefit, which may affect a claimant’s state pension record, as they potentially miss out on National Insurance credits.

It may also mean that children of those who aren’t claiming may not automatically get a National Insurance number when they turn 16.

Link: Concern as high income child benefit charge hits basic rate taxpayers