Coronavirus and cash flow issues: how to postpone your tax payments

1. any business (a company, partnership or  sole trader) may be able to use HMRC’s expanded (but discretionary) Time To Pay scheme for all taxes
2. any VAT-registered business can postpone March – June 2020 VAT payments to HMRC;
3. any individual in financial trouble can postpone the June 2020 self-assessment tax payment on account 
4. employers with special national insurance contributions (NICs) arrangements with internationally mobile employees have a 2 month extension to file its 2019/20 NICs annual settlement return
5. if the worst happens, HMRC is temporarily relaxing its approach on a bankruptcy/insolvency

A quick guide to each measure is set out below.

Any business: HMRC’s Time To Pay scheme

Under this pre-existing scheme, businesses and the self-employed who anticipate cash flow issues can arrange a delay in paying tax in advance with HMRC without incurring interest and penalties. The scheme applies to most UK taxes collected by HMRC and must be agreed on a case by case basis  through HMRC’s Coronavirus helpline (0800 024 1222). Come prepared for questioning from HMRC seeking to establish genuine cash flow issues.

In practice HMRC may be more sympathetic to delaying payments of direct taxes such as corporation tax, rather than deductions made on behalf of another’s tax liabilities such as PAYE or withholding tax on UK-source interest, or indirect taxes such as stamp duties.

Postponing VAT payments

VAT payments to HMRC by businesses and self-employed people which would have been due between 20 March and 30 June 2020 can be postponed until 31 March 2021. Taxpayers will still need to submit VAT returns to HMRC on time. The scheme doesn’t apply to VAT due under the Mini One Stop Shop (“MOSS”) system or import VAT.

Postponing Self Assessment income tax payments

The 31 July 2020 deadline for income tax self-assessment payments can be unilaterally deferred to 31 January 2021. The scheme is optional, but HMRC note that those able to pay their second self-assessment payment by the July deadline should still do so. It covers all taxpayers who pay their tax through self-assessment, for example those with property or other income and not just the self-employed.

Postponing NICs returns for internationally mobile employees

The deadline for submitting certain NICs annual settlement returns for the last tax year (forms NSR Appendix 7A and NSR Appendix 7B) has been retrospectively extended by two months from 31 March to 31 May 2020. These will be relevant only if you are an employer who has agreed to operate NICs under the special “Appendix 6” tax equalisation arrangements for UK employees working abroad or foreign employees working in the UK.

What if the worst happens and my business is at risk of going bankrupt?

HMRC has paused use of winding-up and bankruptcy petitions as an enforcement mechanism until 1 July 2020, unless considered essential – for example where relating to fraud or criminal cases. Where there’s an existing voluntary arrangement and the taxpayer is at risk of COVID-19 related default, HMRC expect supervisors to exercise their discretion where the terms of the arrangement allow for it. Where creditors must be consulted, HMRC will support a minimum three-month deferral of contributions. HMRC will still be an active creditor in new voluntary arrangements and administrations. 

This article gives a high level guide to the issues you’ll need to consider. For anything more complex, our team of corporate tax lawyers can help.